MEF: ECONOMIC RECOVERY KEYS ARE PUBLIC INVESTMENT AND CON PUNCHE PERÚ

Lima, May 4, 2023.- The minister of Economy and Finance, Alex Contreras, said today that the main factors for the recovery of the Peruvian economy have been the Con Punche Perú Plan and the good execution of public investment, after negative months due to social conflicts.

“The conflict had a negative impact in December and January. But the fact is that from February onwards we have seen a significant recovery,” he said.

"A key factor in the recovery of our economy has been the rapid implementation of the Con Punche Perú Plan, but also the good progress in the execution of public investment," he added.

During his participation in the Regional State Council, Alex Contreras pointed out that in April the investment of regional governments grew by more than 26%, and of local governments by 31.8%.

"This is the first year of government for everyone (national, regional and local), but despite this, for the first time we are seeing growth in public investment. The idea is to move forward, with all the effort of the Ministry of Economy and Finance (MEF) and the sectors to coordinate and continue working on the execution of the budgets," he said.

"In the first quarter we exceeded 7,000 million of soles of public investment execution; the latest information is that up to April we passed 10,000 million of soles and the goal is ambitious, but we have to break with this historical trend of under-execution and we are on the right direction and that is the most important thing," he added.

Expectations

The minister explained that, as a result of the social conflict and the negative effects of climate disasters, business confidence collapsed in the first quarter of 2023.

“What we’re seeing now is a rapid recovery of businesses, and workers too, because consumers are beginning to feel optimistic. There are expectations for investment and hiring, which generates dynamic effects throughout the country. I welcome the position of many governors to coordinate with the MEF and the goal this year is to visit all regions,” he said.

"So, confidence is recovering, this is important because it will also influence public investment to be added to private investment, a main driver of growth in an economy," he added.

Con Punche Perú

The minister reiterated that the "Con Punche Perú" Plan was fundamental for the economic reactivation, with 3,458 million soles in the first part and in the second quarter of 2023.

"In the third quarter, around 4,400 million soles will be executed, because as the President has announced, Con Punche III is coming, precisely in this spirit of continuing to reinforce the growth of public investment, but a growth with a different approach, which seeks to attack and reactivate the family economy severely hit by inflation, reactivate the regions and above all, reactivate the sectors," he said.

"It's a different look, a regional approach, understanding the particularity of each region. It is a sectoral approach understanding that we are a heterogeneous country. And that is why different Con Punche Productivo, Con Punche Agro, Con Punche Turismo, Con Punche Puno have been launched", he added.

Alex Contreras pointed out that the challenges are huge and the MEF, in coordination with the sectors, is promoting a series of measures to start improving the investment path, as well as to advance in the unblocking of projects and the execution of public-private partnerships (PPP) and Works for Taxes.

"It is something where there is more fiscal space, and there are excellent opportunities for the private sector to also be the strategic partner of regional and local governments. This will also be a mechanism that we will promote,” he said.

Emergency response

The minister emphasized that the Government has been very active in making progress on economic reactivation and the emergency response to the heavy rains.

“There are many supreme decrees, emergency decrees, legislative decrees, which we have been issuing in recent weeks and months, because we asked for powers and they were approved by the Congress. And as the minister of Defense has announced, more measures will be taken to strengthen the country's capacity to face this new risk," he said.

"It is an imminent risk of very high probability. Unlike the El Niño Costero, the El Niño Global is easier to predict because you can see how it is approaching, from Australia to the coast, and for that, we have to take measures. There is a small window and for this, we all have to work. We will have coordination meetings in the following days, in the following weeks,” he added.

Alex Contreras recalled that, in the context of the emergency and reactivation, the Government requested the Congress of the Republic to approve an additional credit.

“Of this additional credit, about 4,000 million soles will go to reactivation. In the last 12 days, measures for 1,291 million soles have been approved and this week 250 million soles will be approved, plus the 1,000 million soles that the minister of Defense has announced for the acquisition of machinery", he explained.

"We are a resilient economy, but we need to strengthen our resilience in the face of natural disasters. “Los Niños” are very expensive, historically the costs have varied around 5 points of the GDP, we are talking about more than 40,000 million soles", he added.

The minister indicated that the updated budget of the Authority for Reconstruction with Changes is 50,000 million soles, as it is better to prevent than regret.

"A sol of prevention is worth more than 5 soles in reconstruction. And in this regard, we are moving forward as a Government. Within the Council of Ministers, a task group has been formed that meets on Mondays and Thursdays to determine measures to work quickly and jointly with the different levels of government," he said.

"We are moving forward then on these two fronts. For this year, the GDP despite the attacks will grow 2.5% and will be one of the highest growth in the region,” he said.

Inflation

Alex Contreras pointed out that inflation, after some time, will decrease.

“In fact, the reduction in April was particularly important, because it was the largest reduction in inflation in the last 15 months. We went from a level of 8.40% to 7.97% and the trend is for this to continue in the following months," he said.

"The economic scenario has been quite challenging, but we have to start from the basis, and they are that we have a solid macroeconomy. From that, we can work on many aspects that have been mentioned," he added.

Source: Andina