Political crisis rumbles on; growth slows, CA shifts to surplus and fiscal deficit increases; we retain our yearend forecast of PEN3.9:USD1
In this report, we discuss our new quarterly forecasts, which are guided by our three scenarios: base, low and high cases. On politics, we remain firm on our base case, wherein President Dina Boluarte stays in power until the end of her term in July 2026. Moreover, we have reduced the probability of the low case occurring, from 30% in June to 25%, and have increased that of the high case from 10% to 15%.
On the economy, in our base case scenario, we have revised down our 2024 real GDP growth forecast to 2.8%, from 3%. But in the low case we see increased risk, and have revised down our real GDP growth forecasts for 2024‒2027. In the high case, we see a greater upside, and have revised down our 2024 real GDP growth forecast, but have revised up our forecast for 2025‒2027.
We have also revised up our 2024 current account surplus forecast from 0.6% of GDP to 2.1%; and increased the fiscal deficit forecast from 2.5% to 3.4%. For 2025‒2027, we have revised up our CA surplus forecast from 0.3% to an average of 1.3%, and the fiscal deficit from 2.1% to 2.3%.
Our financial markets forecasts have been tracking reasonably well. On September 12th, as expected, the board of the Banco Central de la República del Perú cut its policy rate by 25 basis points, to 5.25%. The PEN:USD spot rate closed on September 13th at PEN3.77:USD1, very close to our PEN3.9:USD1 year-end forecast.
We have made four key amendments to our June forecast. We have lowered our 2024 inflation forecast; raised our terms of trade growth rate forecast; reduced our BCRP policy rate forecast; and adjusted our Soberano and Global forecast for 2024, while retaining our 2025-2027 forecasts unchanged.
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