Nov. 11 (Bloomberg) -- Peru’s government will do whatever is necessary to maintain economic growth as Europe’s debt crisis threatens to turn into a global recession, said Finance Minister Miguel Castilla.
While the government’s current stimulus package, equivalent to 1 percent of gross domestic product, is enough to support growth for now, policy makers stand ready to expand spending further, Castilla said today in an interview in Honolulu, where he’s attending the Asia-Pacific Economic Cooperation Forum.
“If things were to become nastier, we will definitely put together a more aggressive one -- as large as needed,” he said. “It’s critical that growth keeps its performance.”
“If things were to become nastier, we will definitely put together a more aggressive one -- as large as needed,” he said. “It’s critical that growth keeps its performance.”
The deteriorating global outlook threatens to curb the private investment that has fueled a decade of region-beating growth in Peru, damping demand for the commodities that make up three quarters of the nation’s exports. The country has “ample space” to respond with fiscal and monetary stimulus should the global slowdown intensify, Castilla said.
“It depends on the magnitude, whether this is going to be a slowdown or a recession or a recession with a financial crisis,” he said. “Cash we have; liquidity buffers, we have too. The question now is when to be more aggressive,”
Peru’s government tapped three years of fiscal surpluses to implement a $4.8 billion economic stimulus in 2009 after a global recession curbed demand for the Andean country’s metals, fishmeal and natural gas.
Growth Outlook
The central bank left its overnight rate unchanged yesterday at 4.25 percent, a two-year high, as above-target inflation outweighed concern about slowing global demand.
Growth in South America’s sixth-largest economy has gathered pace after consumer and business confidence rose following the country’s June 5 presidential election. The economy expanded 7.5 percent in August, after rising 6.5 percent in July and 5.3 percent in June.
“We’ll slow down for sure because we’re pretty much correlated with world growth,” Castilla said. “Our growth will be between 5 and 6 percent next year in an optimistic scenario, but one cannot disregard a correction if things were to worsen.”
GDP expanded 8.8 percent in 2010, which ranks as the country’s third-fastest annual growth rate in 16 years. Growth averaged 6.4 percent in the past decade.
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