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Peru Economy Shrinks for Second Quarter, Fanning Recession Fears

Peru’s economy likely shrunk by about 0.5% in the second quarter, the central bank’s top economist said on Friday, marking the second consecutive quarter of contraction and the latest warning sign suggesting a technical recession.

The Andean nation’s economy, which has been battered this year by social conflicts and adverse weather caused by El Nino, shrunk 0.43% in the first quarter, according to official data.

In April, the gross domestic product (GDP) of the mining-dependent economy expanded by 0.31%, but then shrank 1.43% in May, before likely contracting by about 0.6% in June, said Adrian Armas, the head of the central bank’s economic studies department.

“There will be a year-on-year contraction in the first and second quarters. Unfortunately we are in a situation of GDP growth lower than our potential,” said Armas.

He acknowledged that economists in multiple countries define a recession as two consecutive quarters of economic contraction, though some criticize the definition as too narrow.

Earlier this month, Finance Minister Alex Contreras told reporters he expects economic growth to return in July and denied that Peru had tipped into a recession.

Peru’s national statistics agency is expected to release official GDP data for June later this month.

Source : Nasdaq