Bloomberg News

Castilla Says Peru Fiscal Policy to Boost GDP This Year

January 12, 2012

(Updates to add Castilla’s comment in third paragraph.)

Jan. 11 (Bloomberg) -- Peru’s economy will probably grow with “significant vigor” this year as the government steps up spending to offset a slowdown in private investment, Finance Minister Miguel Castilla said today.

Though growth slowed in the fourth quarter of last year, domestic demand indicators are “strong,” Castilla told reporters in Lima. Construction output rose more than 20 percent in December, he said.

“There is significant vigor in the economy, which should continue this year,” Castilla said. “Fiscal policy will be much more expansive but it must accompanied by private investment.”

South America’s sixth-largest economy is slowing as private investment eases on concern the global slowdown will cut demand for Peru’s metal, agricultural and textile exports. The Andean country seeks to increase public investment by about 30 percent this year via a fiscal stimulus worth 2 percentage points of gross domestic product.

Gross domestic product rose by about 5 percent in the fourth quarter, after 6.5 percent expansion in the third quarter, Castilla said. Growth for last year was 6.7 percent to 6.8 percent, he said. GDP will rise 5.4 percent this year, Castilla said Dec. 21.

The Andean country is in talks with investment banks about a bond sale in the local or international market, Castilla said. How the government’s proceeds will depend on market conditions, he said.

The Peruvian sol was little changed at 2.6930 per U.S. dollar at the close of trading today.

To contact the reporter on this story: John Quigley in Lima at jquigley8@bloomberg.net

To contact the editor responsible for this story: Joshua Goodman at jgoodman19@bloomberg.net


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