1. Perú: Recent Economic Developments and Perspectives Central Reserve Bank of Peru October 2002

2. 2 Contents  GDP: Sources of Growth  Balance of Payments  Monetary Policy  Fiscal Policy

3. 3 GDP and Domestic Demand rates of growth GDP January-August 2002: 4,1%

4. 4 Private Fixed Investment rate of growth In the third quarter of 2002 Private Investment has increased 4,4 percent

5. 5 Global Supply and Demand  ATPDEA: Extension of trade agreement with US (Clothing and agricultural products)  Investment: Camisea Gas project (US$ 300 million in 2002 and US$ 500 million in 2003).  Terms of trade: 3,2% in 2002 and 2,3% in 2003.  GDP growth in 2003 (trade partmers): 2,9%  El Niño (moderate) with possitive impacts in crops like grapes, mango, corn, sweet potatoes and sugar cane. Negative impact in fishing.

6. 6 Gross Domestic Product (by Sector)  GDP driven by growth of primary sectors.  Mining growth in 2002 due to the increase in zinc production (Antamina) and copper (Southern). In 2003 the growth is explained by greater zinc, copper and silver production.  Manufacturing growth during 2003 will respond to positive effects due to the ATPDEA.  Increase on manufacturing and construction lead this impulse through their positive impact on employment.

7. 7 World Economy

8. 8 Contents  GDP: Sources of Growth  Balance of Payments  Monetary Policy  Fiscal Policy

9. 9 Sustainable External Accounts % of GDP

10. 10 New Projects will turn Trade Balance into surplus Million US$

11. 11 Foreign financing requirement  The foreign financing requirement in 2002 amounts to US$ 5,3 billion, thus decreasing down to US$ 3,1 billion in 2003.  Non-financial public sector’s requirement will decrease its foreign financing requirement from US$ 2,9 billion in 2002 to US$ 1,8 billion in 2003.

12. 12 Net International Reserves October 22: US$ 9 9 75 million

13. 13 Indicators of External Vulnerabilities

14. 14 Contents  GDP: Sources of Growth  Balance of Payments  Monetary Policy  Fiscal Policy

15. 15 Inflation Target: 2.5% +/- 1%. Inflation Targeting adopted in 2002 Jan-Sep 2002:Headline 1,2 percent Core 1,3 percent

16. 16 Exchange Rate Indicators

17. 17 Interbank Interest Rate

18. 18 Latin America Exchange Rates Latin American Countries inflation in 2002 Bolivia1.1% Chile 2,8% Mexico 4,9% Colombia 6,1% Brasil 6,8% Paraguay 11.1% Uruguay 22.7% Venezuela 32,5% Argentina 72,2%

19. 19 Spread of Foreign Bonds

20. 20 Bank’s asset quality Nonperforming loans to total loans ratio has dropped from 9,8% in 2000 to 9,0% in 2001 to 8,4% in July 2002.

21. 21 Credit has increased in 1,3 percent in september (12 month growth. In 2003 it is expected to grow 4,5 percent Credit to the Private Sector

22. 22 Interest rates 2001 - 2002  Prime interest rates in domestic currency have shown a decreasing pattern similar to the interbank interest rate.  Prime interest rates in foreign currency have decreased to levels below 2,7% in September.

23. 23 Dollarization In September 2002 total liquidity in dollars is equal to US$ 9,8 billions and the dollarization ratio has fallen to 55 percent. On the other hand, Banking system deposits at the Central Bank are US$ 3 805 million.

24. 24 Contents  GDP: Sources of Growth  Balance of Payments  Monetary Policy  Fiscal Policy  Risk Balance

25. 25 Reduction of the Fiscal Deficit % of GDP New tax measures: Advanced payment system of income tax based on 1% of net assets. New VAT system of witholdings

26. 26 Public Sector Borrowing Requirement  The fiscal policy target is to reduce the deficit from 2,2% of GDP in 2002 to 1,9% in 2003, toward levels below 1% in the medium term.  The Public Sector’s financial requirement would amount to US$ 2,3 billion in 2002 and to US$ 2,6 billion in 2003.

27. 27 External debt mainly with governments and multilateral organizations Stock of external debt: US$ 19,9 billion. Average interest rate 2002: 5,3% Average maturity: 8 years