The Social unrest and political crisis that have plagued Peru since December could undermine the macroeconomic outlook and put more pressure on the Andean country’s fiscal position, debt ratings agency Fitch Ratings said on Thursday.
Peru’s fiscal deficit fell to 1.6% of Gross Domestic Product in 2022, down 0.9 percentage points from the previous year, according to data from the Economy Ministry.
The reading is above Fitch’s anticipated gap of 2% and according to the agency it could be sustained if discipline in public finances is followed and the prices of industrial metals, such as copper, remain solid this year.
However, the growing possibility of the political crisis spreading could harm fiscal resilience and the outlook for the sovereign rating note, currently “BBB”, with a negative outlook, Fitch said in a report.
“Recent events are consistent with our estimate that this deterioration could be difficult to reverse in the foreseeable period up to the end of 2024,” the firm said.
“The crisis has increased fiscal uncertainty and could have an impact on the execution of investment spending,” he added.
Peru, the world’s second largest copper producer, has been experiencing severe political paralysis and social discontent since the removal of the leftist president Pedro Castillo after hisillegal attempt to dissolve Congress.
The government of current President Dina Boluarte has unsuccessfully tried to bring up the general elections this year to appease the fierce protests and blockades, which have left at least 60 dead in clashes with the security forces since the beginning of December.
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