PERUVIAN MACRO
2009 OUTLOOK AND STRATEGY
• Gross Domestic Product will decelerate from 9.4% in 2008 to 5.4% in 2009.
The economic growth will continue to be mainly guided by the non-primary
sectors. As in previous years, the “Construction” sector, supported in this
case by the anti-crisis plan, will be the top performer.
• The decline of agricultural commodities and fuels prices will aid to moderate
the effects of imported inflation. Furthermore, the deceleration of domestic
demand will contribute to ease local inflationary pressures. In this sense, we
expect the CPI to end the year within the higher end of the Central Banks
target band (1.0%-3.0%).
• The local currency will continue to face depreciatory pressures, influenced by
the lower capital inflows and the deterioration of the Current Account
balance.
• We estimate that the Government will post a fiscal deficit of 1.0% of GDP in
2009, due to the lower tax collection and the significant increase of fiscal
expenses, given the development of an aggressive public investment
program.
• The Current Account balance will reach a 3.9% of GDP deficit in 2009. The
deteriorating external scenario will drag exports down, driving the country to
register its first Trade Balance deficit since 2001.
• We consider that the LSE Selective index will grow 10.0% in 2009. The
upside of our sample, especially of mining shares, will be somewhat limited
by international markets volatility. Moreover, we believe that volatility will be a
constant in 2009; nevertheless, we estimate that it will ease in IIH09 as we
expect that the measures adopted by the main economies will start to
materialize. We continue to expect that domestic demand related sectors will
outstand among our sample. In this sense, we estimate that the Consumer
Goods sector will lead the way, followed by the Agriculture sector. At current
prices, the most attractive shares at the LSE from our sample are Minsur I,
Alicorp C, Casa Grande, Cerro Verde, Ferreyros and Pacasmayo C.
• Peru’s Sovereign Spread will remain influenced by the evolution of global
financial markets; nevertheless, once markets begin to settle down, the effect
of the Investment Grade Status will gain relevance on investors mind. We
have set our 12-month instrumental sovereign spread estimate at 375bps.