Peru's economy faced a major setback in May, experiencing a significant contraction after two months of sluggish growth. This outcome dashed hopes that the country was on its way to a slow recovery following its worst political turmoil in decades.
The national statistics agency, INEI, reported that the economy contracted by 1.43% compared to the same period last year. This marks the largest decline since the depths of the pandemic in early 2021. Surprisingly, all three analysts surveyed by Bloomberg had anticipated modest growth for the country.
This disappointing figure highlights the current fragility of Peru's economy, which has been severely impacted by the recent historic unrest that resulted in numerous fatalities and has significantly harmed investor confidence. Even though there was some growth last month, it fell short of even the most pessimistic forecasts.
According to INEI, during the first five months of this year, Peru's economy has contracted by 0.49%. The country's fishmeal industry, the largest in the world, played a major role in this decline as it experienced a 70% collapse. Warmer waters caused by the El Niño weather pattern forced a halt in fishmeal production.
The economy's contraction not only places pressure on President Dina Boluarte's administration but also poses challenges to the finance ministry, which had previously asserted that a recovery was already underway and that the economy would grow by 2.5% this year. However, this target now seems increasingly unattainable in light of the recent setback.