Country Report Peru May 2000 Updater

Economic forecast: External sector

The contraction in domestic demand in 1998-99 helped to narrow the current-account deficit to 3.6% of GDP in 1999. We expect the deficit to widen again to US$2.7bn in 2000 (4.5% of GDP) and to more than US$3bn in 2001 (4.8%of GDP). Such a deficit will not bring alarm, as much of the increase will be accounted for by capital goods required for export- oriented projects such as the Antamina mining complex.

Antamina is scheduled to come on stream in early 2002, increasing export earnings by over US$1bn, which, added to a rapid rise in income from tourism, will help to narrow the current-account deficit thereafter. Inflows from mining and tourism will be particularly strong, and capital import demand will start to wane.

Forecast summary (% unless otherwise indicated) 1998(a) 1999(a) 2000(b) 2001(b) Real GDP growth 0.3 3.8 4.6 4.7 Industrial production growth -0.7 4.5 8.4 4.5 Agricultural production growth 3.6 12.1 2.0 3.0 Gross fixed investment growth -1.7 -13.7 9.4 8.8 Unemployment rate (av) 7.9 7.7© 7.8 7.2 Consumer price inflation Average 7.3 3.5 4.2 3.9 Year-end 6.0 3.7 4.5 4.2 Short-term interbank rate 30.8 30.8 26.6 23.9 NFPS balance, excluding privatisations (% of GDP) -0.7 -2.6 -1.9 -1.0 Exports of goods fob (US$ bn) 5.7 6.1 7.0 7.7 Imports of goods fob (US$ bn) -8.2 -6.7 -8.0 -9.0 Current-account balance (US$ bn) -3.8 -2.0© -2.7 -3.2 % of GDP -6.1 -3.6© -4.5 -4.8 Total foreign debt (year-end; US$ 32.4 30.8© 31.4 32.3 bn) Exchange rates (av) Ns:US$ 2.94 3.40 3.48 3.46 Ns:¥100 2.25 2.98 3.22 3.29 Ns:?(d) 3.30 3.63 3.45 3.77 (a) Actual. (b) EIU forecasts. © EIU estimate. (d) Ecu before 1999.

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