Peru’s economy rebounds by record 42% after slump last year

Peru’s economy rebounded in the second quarter, shrugging off political and financial volatility as it recovers from one of the world’s deepest slumps last year.

Gross domestic product grew 41.9 percent in the three months through June from the same period a year earlier, the national statistics institute said Monday. The result was higher than the 41.5 percent median estimate of analysts surveyed by Bloomberg.

The rapid annual growth rate mainly comes from comparing activity to the second quarter of 2020, when the nation suffered the most severe contraction of any major economy. Peru’s lockdown to curb the pandemic was the tightest in the region according to mobile phone data collected by Google, and devastated the economy, though business rebounded when it was lifted. 

Peru raised its key interest rate for the first time in five years this month, as the recovery gains strength and inflation accelerated faster than expected. 

Peru’s economy has been one of the fastest-growing in Latin America in recent years, even at times of political turmoil such as that experienced during the second quarter. 

Rattled investors

In April, a little known teacher from a Marxist party, Pedro Castillo, unexpectedly beat all other presidential candidates. Then, in June, Castillo won the run-off by a narrow margin, though his opponent, Keiko Fujimori, refused to concede and there followed weeks of recounts and legal challenges. 

Since Castillo was sworn at the end of July, the currency has weakened the most among more than 24 emerging market currencies tracked by Bloomberg after Brazil’s real.

In his first week in office, Castillo said Peru needs to recover sovereignty over its natural resources and renegotiate its free trade deals, and rattled investors with some of his cabinet selections.

The country’s recovery is getting a boost from a rally in the price of copper this year, Peru’s biggest export, which hit a record high in May. 

Peru’s economy is still down 0.4 percent compared to the second quarter of 2019, according to the national statistics institute.