Bloomberg News

Peru Economy to Grow 6.3% This Year and Next, Central Bank Says

March 22, 2013

Peru’s economy will expand 6.3 percent this year and next, while inflation will end the year at about 2 percent, the central bank said in a report issued in Lima today.

The bank had said on Dec. 14 that gross domestic product would rise 6.2 percent in 2013 and 6.3 percent in 2014. Inflation slowed to 2.5 percent in February from 2.9 percent the month before.

The central bank will sell $4 billion to the Finance Ministry this year, Julio Velarde, the bank’s president, told reporters during the presentation. The bank is not concerned about capital losses stemming from its program to buy dollars and doesn’t need more capital, he said.

The bank’s equity has declined after its net loss through Nov. 30 increased nine-fold to 1.1 billion soles from 121 million soles a year earlier. The monetary authority has purchased $30 billion since 2009 to ease a rally in the sol stemming from capital flows into the country. The purchases have doubled Peru’s foreign reserves to $68.4 billion in three years.

After buying dollars, the central bank sells certificates of deposit to absorb the soles from the market. The bank’s capital has fallen as it pays higher interest on the certificates, currently about 3.80 percent, than it earns from its dollar reserves invested overseas.

The central bank lost 203 million soles in 2011, its first negative result since 1994.

Capitalizing the central bank will give it leeway to continue intervening in the foreign exchange market, Finance Minister Miguel Castilla said March 17.

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

To contact the editor responsible for this story: Andre Soliani at asoliani@bloomberg.net.


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