Kurt Burneo warns that Peru is close to recession, what does that mean?

The Peruvian economy is cooling down and could fall next recession, according to the head of the Ministry of Economics and Finance Kurt Burneo. But what is a recession?

For former Economics Secretary David Tuesta, a recession occurs when economy it has been falling for three quarters in a row, which hasn’t happened yet, but it warns that we face the risk of a slowdown.

“What is observed anyway is the context of the economic downturn which implies that your growth rates are declining and this is what we are seeing (…) Today, with low growth, we have problems creating quality jobs . . the recessive scenario assumes less economic activity, assumes fewer opportunities for hiring people not only in the formal but also in the informal sector. It is less likely that the conditions and well-being of the population can improve, but, frankly, today this is not included in the scenario of greater likelihood,” he explained.

Tuesta claims that the risk recession This would only be visible if some political scenario of very severe stress occurs that paralyzes the economy, but he believes that even with a possible presidential vacancy, the fundamentals of the Peruvian economy are strong enough.

“The chance will increase, but it won’t necessarily happen. Remember that Peru has already experienced several stress scenarios with five presidents in less than five years, and not in all cases have we seen the economy enter a recession scenario. expectations are further reduced, economic growth is slowing down, but the scenario recession It remains to be seen whether some economic agents can perceive this situation from a positive point of view. It is very difficult to try to interpret what the reaction of economic agents will be,” he added.

For Juan Carlos Odar, director of Phase Consultores, a technical recession is when the economy has been down for at least six months in a row, but he points out that we won’t even find ourselves in a slowdown after the latest GDP growth data, which shows that only in June, national production rose by 3.44% compared to 2.3% registered in May.

“In the first months of the year, we were clearly in slowdownbut seems to have arrived at his apartment in May. In June, it showed a very fast, very strong and unexpected rebound (…) It is very difficult to think that we are in a scenario on the way to a recession. what could happen is that we are moving towards low growth, given, on the one hand, the weak global context, as well as political issues and everything that implies private investment, ”he clarified.

A spokesman for Phase Consultores believes that the Peruvian economy will end 2022 with growth of 2.8%, with a smaller growth of 2% expected for 2023.

The forecast is in line with what was mentioned by the Minister of Economy, who indicated that in GDP this year it will increase only by 2.4-3.4%.

For his part, the head of the Institute for Economics and Business Development (IEDEP) of the Lima Chamber of Commerce, Oscar Chavez, agrees that a recession in 2022 is impossible, but that the risk will be higher next year.

“We see difficulties for 2023, that is, it is not viable to live on bonds and waste of capital. private sectorWe need sectors to grow, mining and hydrocarbons are the ones predicted to grow the most next year, but what will happen to manufacturing, construction, trade? We need these sectors to move forward, and this is happening through the restoration of business confidence,” Chavez said.

The Lima Chamber of Commerce notes that business confidence has been pessimistic since April 2021, which coincides with the fact that private investment growth expectations are 0% this year.

The truth is that experts point out that there is no need to achieve recession so Peruvian household incomes are falling, leading to lower consumption, making it harder to reverse the poverty situation in which more than 8.5 million people live.