Post on 01-Aug-2020
Carlos Oliva Neyra. Minister of Economy and Finance
“PERU: LEADING GROWTH ACROSS THE REGION”
PERUMacroeconomic overview
September 14th., 2018
2
Macroeconomic fundamentals1
Content
Current economic situation2
Economic policy measures3
Debt management4
3
Three reasons why to invest in Peru
Macroeconomicstability
Investment-friendly
environment
Openness to the world
4
Macroeconomic stability: healthy balances
International reserves(% of GDP, 2017)
Country risk(bps, average 2017)
Inflation(%, average 2000-2017)
Public debt(% of GDP, 2017)
Source: International Monetary Fund (World Economic Outlook, April 2018).
264
194
256
130145
Bra Col Mex Chi Per
18.014.7 14.3 13.7
28.2
Bra Col Mex Chi Per
84.0
49.454.2
23.6 23.3
Bra Col Mex Chi Per
6.75.2 4.6
3.3 2.8
Bra Col Mex Chi Per
5
Macroeconomic stability: strong economic institutions
Autonomous and independent central bank. Monetary policy is conducted under an inflation targeting scheme with foreign exchange flexibility.
The macro-fiscal framework is based on rules that seek a predictable, responsible, and transparent management of public finances, following best practices in developed countries.
Under a market-oriented economy that promotes openness and a legislation that gives the same treatment to local and foreign investors.
6
Openness to the world
USD 8.1 billion
North America
(19,2 %)
USD 6.9 billion
LAC
(14,7%)
USD 8.5 billion
Europe
(20.3%)
USD 0.3 billion
Africa
(0.7%)
USD 0.3 billion
Oceania
(0.9%)
USD 19.1 billion
Asia
(44.2%)
Peru has implemented Free TradeAgreements (FTA) with 21 countriesthat represent 75% of the world GDP and90% of total world trade.
The Pacific Alliance, which includesChile, Colombia, and Mexico, is aplatform to jointly promote investmentand financial integration.
Accession process to the OECD willsupport continuity of importantstructural reforms on institutions,informality, innovation, among others.
Peru: total exports(US$ billion and % of exports to the world, 2017)
Source: Sunat and Mincetur.
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Macroeconomic fundamentals1
Content
Current economic situation2
Economic policy measures3
Debt management4
81/ Inventories are not included.
Source: BCRP, INEI.
Domestic demand1
(Real % annual change)
Fiscal stimulus
Private investment
GDP(Real % annual change)
4.6
3.9
4.7
3.1
2.32.6
2.7
2.3
3.1
5.4
16Q1 16Q2 16Q3 16Q4 17Q1 17Q2 17Q3 17Q4 18Q1 18Q2
3.8
1.7
1.1
-2.1
-1.1
0.7
3.3 3.33.8
5.0
16Q1 16Q2 16Q3 16Q4 17Q1 17Q2 17Q3 17Q4 18Q1 18Q2
Current economic activity upturn is driven by domestic demand
9
Public and private investment(Real % annual change)
1/ Information based on Sunat’s electronic payrolls.
Source: BCRP, MEF.
Formal employment1
(% annual change)
3.6
4.5
0
1
2
3
4
5
16Q1 16Q2 16Q3 16Q4 17Q1 17Q2 17Q3 17Q4 18Q1 18Q2
Total Private sector
6.1
0.3
-13.8
-17.4
-5.7
5.5
1.6
5.5
9.0
-5.1
-7.7
-4.5-5.3
-2.6
5.5
3.15.3
8.5
16Q2 16Q3 16Q4 17Q1 17Q2 17Q3 17Q4 18Q1 18Q2
Public investment
Private investment
Total investment has fostered the upturn of employment
10
-0.3
-2.0
-2.5
-3.1
-2.1
-3.5
-3.0
-2.5
-2.0
-1.5
-1.0
-0.5
0.0
Dec-14 Dec-15 Dec-16 Dec-17 Aug-18
S&P
Perú
Chile
Colombia
México
Brazil
BBB+ A3 BBB+
A+ A1 A
BBB- Baa2 BBB
BBB+ A3 BBB+
BB- Ba2 BB-
Moody’s Fitch
Latin America: credit ratings and outlooks
Stable outlook Negative outlook
Stable outlook but recent
downgrade in the last 12 months
Fiscal balance1
(% of GDP, 12-month rolling sum)
1/ Non-financial public sector overall balance.
Source: S&P, Moody’s, Fitch, BCRP, MEF.
Peru continues as one of the few economies with no credit rating changes
11
-2.4
3.0
3.3
5.6
13.2
13.5
19.7
24.6
25.5
69.6
103.8
Mexico
Peru
Colombia
China
Chile
India
Russia
South Africa
Brazil
Turkey
Argentina
35
9
12
36
20
69
66
101
96
258
390
Macroeconomic strength is important in financial turbulence periods
1/ As of September 11th., 2018.
Source: Bloomberg.
Emerging markets: MSCI equity index1
(Index)
Peru has a strong external position recognized by global investors: low level of short-term debt, high net international
reserves and current account financed by long-term investment.
2018: Financial indicators1
Exchange rate(% change, YTD)
Sovereign risk(Diff. pbs., YTD)
1,000
1,050
1,100
1,150
1,200
1,250
1,300
Jan-18 Feb-18 Apr-18 May-18 Jul-18 Sep-18
12
Peru will continue to lead regional growth with sound fiscal fundamentals
Latin America: GDP forecasts(Real % annual change, average 2018-2022)
Source: LatinFocus Consensus Forecast - august 2018, MEF forecasts.
4.5
3.4
3.2
2.5
2.4
Peru
Chile
Colombia
Brazil
Mexico
Peru: fiscal balance(% of GDP)
-3.1
-3.5
-2.9
-2.1
-1.0
-3.0
-2.7
-1.9
-1.0
2017 2018 2019 2020 2021
MMF 2018-2021
Current forecast
13
Macroeconomic fundamentals1
Content
Current economic situation2
Economic policy measures3
Debt management4
14
Strengthengrowth
Modernizationof the public
sector
Foster competitiveness
Source: MEF.
1
2 3
The government has designed guidelines to increase potential growth
15
Improve country’s
general welfare
Underpin potential
growth
Source: MEF.
Achieve growth rates of
5% in the coming yearsReduce poverty
The goals are to promote economic growth and increase citizens’ welfare
16
Macroeconomic fundamentals1
Content
Current economic situation2
Economic policy measures3
Debt management4
17
The sources of financing come from asset management and internal and external liabilities
Fiscal Stabilization Fund
Local Market
CAF BID BIRF Otros
Soberanos Bonds
International Market
Global Bonds
Stock as of July 31, 2018
USD 9,336 mn
EUR 2100 mn
Contingency loans
As of July 31, 2018
Secondary Liquid Reserve
National Emergency
International CrisisSavings
Mechanism
Assets Liabilities
USD 6,388 million
Fund size as of July 31, 2018
USD 4,000 million
Debt Capital Markets
Multilateral and Bilateral LoansOther Non Financial Public Sector Financial Assets
Sources of
Funds
Lines of defense to finance Economic Growth
18
“solarize” Debt and develop local debt capital markets
6457
4634
530 49
59
31
145 7
2004 2009 2014 2018*
Dollars Soles Other
Composition of Public Debt by Currency(% of total debt)
Liability Management (LM) 2014-2017(Millions of dollars)
2 115
500
1 303
545
1 250 1 2321 120
3 042 3 084
BS 24 BG 50 BS 31 BG 50 BG 27 BG 26 BG 30 BS 28 BS 32
LM 2014 LM 2015
LM 2016 LM 2017
USDEURsoles • No USD paper
• No New money
* Jun. 2018
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Peru has significantly increased its Soberanos debt stock by focusing on international format debt issuances (GDNs and Euroclear)
Soberanos
USD Global Bonds
Debt Capital Markets
linkers Treasury bills
EUR Global Bonds
Local Market
International Market
Development of the debt market through sovereign
bond issues in soles
Taking advantage of Windows of opportunity to
maintain liquidity/efficient yield curves
Local GDN’s
Since 2005, Peru has successfully increased its
Soberanos (PEN) debt stock by 10.9x compared to a
growth of 1.8x for its Global Bonds (USD and EUR) debt
stock…Sovereign bonds and Global bonds
(soles MM, USD/EUR MM, nominal)
6 513 8 571 9 458 11 440 11 548
11 548
8 092
26 008
32 961
44 849
86 399 88 270
dec-05 dec-10 dec-13 dec-15 dec-17 aug-18
Global Soberanos
10.9x
1.8x
Euroclear
20* Aug. 2018
The solarization strategy has been successful in improving market Liquidity in primary and secondary markets
Secondary Market Activity(PEN million)
-
3 500
7 000
10 500
14 000
Jan
Ma
r
Ma
y
Jul
Se
p
Nov
Jan
Ma
r
Ma
y
Jul
Se
p
Nov
Jan
Ma
r
Ma
y
Jul
Se
p
Nov
Jan
Ma
r
Ma
y
Jul
2015 2016 2017 2018
+42%
+56%
Monthlyaverage
4,853
Monthlyaverage
6,906
Monthly average10,760
Monthlyaverage14,211
+32%
Primary Market Activity(PEN million)
0
2 000
4 000
6 000
8 000
10 000
12 000
200
8
200
9
201
0
201
1
201
2
201
3
201
4
201
5
201
6
201
7
201
8*
21* Aug. 2018
Diversification of non- resident investor base for local bonds
30%
33%
36%
39%
42%
45%
48%
51%
7.840% Aug 2020s
S/ 4,196 millions
Date.; Nov 10
5.700% Aug 2024s
S/ 7,128 millions
Date; Nov 14
55%
6.950% Aug 2031s
S/ 4,392 millions
Date; Mar 15
6.350% Aug 2028s
S/ 10,251 millions
Date; Sep 16
Sovereign Bonds: Non- resident investors (% of total investors)
45%52%
47%
Issuances Benchmark Issuance of S/ 10.3 billion
6.35% Sovereign Bonds 2028
(One of the largest local
currency issues in emerging
markets, the same that
reduced liabilities in USD)
6.150% Aug 2032s
S/ 10,000 millions
Date; Jul 17
Issuance S/ 10 billion 6.15%
Sovereign Bonds 2032
(Issuance that had a demand
exceeding 30bn and that was
settled through Euroclear)
* 41.9%
70%
22
However, while the Republic has focused on “Solarization”, it remains committed to both its USD and EUR curves
Provide better liquidity
Lower risk of funding by diversifying
markets
Diversify currencies looking for natural
hedges
Continue to grow the depth and breadth of
its high quality investor base
Increase investor pool
Windows of opportunity in USD and EUR
Carlos Oliva Neyra. Minister of Economy and Finance
“PERU: LEADING GROWTH ACROSS THE REGION”
PERUMacroeconomic overview
September 14th., 2018