Peru plans new steps to boost ailing economy, bets on Q3 recovery

"What we hope going forward is for this recovery to take a kind of W shape; first, a fall due to the protests, then a recovery, then a new fall and then a new recovery," Contreras explained during an online presentation. The economy of the world's second-largest copper producer contracted 1.43% year-on-year in May, breaking two consecutive months of growth and marking its worst performance since February 2021.

Peru's government will unveil new measures in the coming weeks designed to lift the Andean country's battered economy, a senior minister said on Monday, after its worst contraction in over two years in May.

Economy Minister Alex Contreras touted what he dubbed "fiscal space" within the public treasury, suggesting new spending plans, but he did not provide further detail. Since earlier this year, Peru's mining-dependent economy has been hit by destabilizing anti-government protests after leftist former President Pedro Castillo was ousted and jailed last December after he sought to disband Congress and rule by decree.

The protests temporarily shut key copper mines while also battering the country's large tourism sector. Fresh protests are expected to kick off this Wednesday, with leftist organizers pledging a third takeover of the capital Lima. Contreras nevertheless predicts economic recovery during the second half of the year, powered in part by a turnaround in fishing and farming.

He pointed to the recent downturns in both sectors, which he said clipped two percentage points of economic growth in May. "What we hope going forward is for this recovery to take a kind of W shape; first, a fall due to the protests, then a recovery, then a new fall and then a new recovery," Contreras explained during an online presentation.

The economy of the world's second-largest copper producer contracted 1.43% year-on-year in May, breaking two consecutive months of growth and marking its worst performance since February 2021. But Contreras instead focused on a slower rise in consumer prices after the inflation rate soared last year. He also forecast annual inflation for July at 5.9%.

"We expect inflation to continue to decline," said Contreras. The minister cited El Niño weather phenomenon fallout as the greatest risk to the economy's health going forward, but expressed confidence it could be overcome.

"We're prepared for that," he said.