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Peru central banker sees steady growth through 2014
September 26, 2012 / 3:36 PM / in 5 years

Peru central banker sees steady growth through 2014

* Central bank sees 6 pct growth in 2012, 2013; 6.3 pct in 2014

* Sees sol currency stable relative to other currencies in Latam

NEW YORK, Sept 26 (Reuters) - Peru’s economy is positioned to weather any spillover from the debt crisis in the euro zone and is seen posting steady growth rates through 2014, the country’s central bank chief said on Wednesday.

The Andean country’s macroeconomic fundamentals are relatively strong thanks to its pace of expansion, Central Bank Governor Julio Velarde said, presenting an economic outlook to investors in New York.

While he reiterated earlier forecasts that the mining and commodities-based Andean economy would expand by 6 percent in 2012 and 2013 - among the fastest in Latin America - he also said growth would then ramp up to 6.3 percent in 2014.

The economy grew 6.92 percent in 2011.

But unlike Peru’s “lost decades,” when a guerrilla war and hyperinflation stymied growth, Velarde noted Peru has become a key metals producer, competitive with larger countries in terms of population and area.

Employment in the country has been growing strongly, thanks to “tailwinds on commodities prices,” Velarde said. Peru is the world’s No. 2 copper, silver and zinc producer and the sixth-largest gold producer.

Minerals account for about 60 percent of exports, making it sensitive to economic slowdowns in China and the euro zone, key consumers of its commodities.

But Velarde said “Peru is better prepared” to weather any turbulence from the euro zone that may spill over into emerging market economies as it “has the instruments to react immediately” as it did following the 2008-09 financial crisis.

Already among the lowest in the region, Peru’s full-year 2012 inflation rate is forecast at 3 percent and is expected to slow to 2 percent in 2013, he said.

The country is also expected to post a fiscal surplus of 1.5 percent of GDP in 2012, with a slight narrowing to 1.1 percent in 2013 and 2014. That would extend the reversal of the narrow fiscal deficits posted in 2009-10 in the wake of the global economic crisis.

Owing to such stable indicators, Peru has held interest rates unchanged at 4.25 percent since May 2011.

During that period, it has tightened bank deposit requirements twice to slow the pace of credit expansion and curb a rally in Peru’s currency, the sol, which is trading around 2.596 per dollar, near a 15-year high.

The central banker said he does not see any problems on the demand side of the economy and expects rates to remain stable as long as the country’s economy is growing.

Peru has already become the sixth-fastest growing economy in the world over the last 11 years, he said.

Thanks to this extended period of growth, poverty in Peru has been halved in the last decade, Velarde noted, a record of poverty reduction that only China can compete with. (Reporting by Gary Crosse, additional reporting by Terry Wade; editing by Theodore d‘Afflisio) (Reuters Messaging: gary.crosse.thomsonreuters.com@reuters.net)

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