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UPDATE 1-Peru's central bank cuts growth view for 2014, 2015
October 17, 2014 / 7:08 PM / 3 years ago

UPDATE 1-Peru's central bank cuts growth view for 2014, 2015

* Expect 3.1 pct expansion in 2014, 5.5 pct in 2015 - central bank

* Peru mining activity in 2015 weaker than previous estimate

* Trade gap view 2014 widens to $3 bln, inflation view to 3 pct (Rewrites throughout to add central bank president comment on mining and other details)

By Teresa Cespedes

LIMA, Oct 17 (Reuters) - Peru’s central bank slashed its official view of this year’s economic expansion to 3.1 percent from its July estimate of 4.4 percent, and said it now expects a weaker economic rebound in 2015.

Next year the economy will likely grow by 5.5 percent, the central bank said in a quarterly report, revising down its previous forecast for a 6 percent expansion.

Peru’s economy has slowed sharply this year on tumbling mineral exports and slipping investments, leading the government and central bank to halve their initial forecasts for a 6 percent expansion in 2014.

Weaker than expected mining activity next year will mean a less robust rebound from the worst economic slowdown in five years, said Central Bank President Julio Velarde.

“The reduced estimate for 2015 is basically because of mining,” Velarde said at a presentation of the bank’s report.

“Before we projected mining to rise 9 percent and now we’re estimating 6.5 percent,” he said.

Velarde cited delays at MMG Ltd’s Las Bambas mega copper project, now forecast to kick off production in early 2016 instead of the second half of 2015.

Velarde also said problems at a major copper mine will likely drag into the second quarter of 2015.

Velarde did not identify the mine, but copper output from Antamina - one of Peru’s biggest copper mines - has fallen this year on lower ore grades.

Mining makes up about 15 percent of gross domestic product in Peru and some 60 percent of export earnings.

The Andean country will likely post a $3 billion trade deficit this year, the central bank said, widening its July estimate of $2.6 billion.

Nevertheless, the central bank trimmed its view of this year’s current account deficit to 4.7 percent of GDP from 4.8 percent.

It also held its estimate for a fiscal surplus of 0.2 percent of GDP this year.

The central bank said that the annual inflation rate will likely be 3 percent at the end of 2014, higher than its previous estimate of 2.8 percent and at the upper limit of its 1 to 3 percent target range.

The central bank has lowered the key interest rate three times over the past year to encourage economic activity.

Growth has remained tepid since slowing to a 0.3 percent year-on-year expansion in June, the weakest rate since 2009.

In August, the economy grew by 1.2 percent on the year for the second straight month, dragging growth registered so far in 2014 down to 2.75 percent from the same period a year earlier.

Velarde said he expects economic activity to pick up to expand by 3.8 percent in the fourth quarter from the same period a year ago.

In all of 2014, private investment will likely fall by 0.4 percent and public investment will be flat, Velarde said.

Mining activity will fall 2.8 percent this year and manufacturing 0.7 percent, he added. (Reporting by Teresa Cespedes; Writing by Mitra Taj; Editing by James Dalgleish and Grant McCool)

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