UPDATE 2-Peru will likely post $1 bln trade deficit in 2014

Fri Apr 25, 2014 6:07pm EDT

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(Recasts lead, folds in other forecasts and announcements)

By Patricia Velez and Teresa Cespedes

LIMA, April 25 (Reuters) - Peru will likely post a trade deficit of about $1 billion in 2014 as imports outpace the global miner's exports for a second straight year and the economy expands less than expected, officials said on Friday.

The mineral-rich Andean country's exports of copper, gold and silver are not seen rebounding to levels Peru enjoyed during a decade-long mining boom, when the average annual trade surplus topped $5.5 billion.

At the same time, imports in the fast-growing emerging economy continue to surge as the middle class broadens and domestic demand remains strong.

Peru posted a $365 million trade deficit last year, its first negative gap since 2001.

The finance ministry doubled its estimate for this year's trade deficit to $1.03 billion from its August forecast of a $485 million deficit. And the central bank flipped its December view of a $40 million trade surplus to a $945 million deficit.

Mining makes up about 60 percent of Peruvian exports and 15 percent of gross domestic product.

The finance ministry said it expects exports to be limited in part because of a lower price for gold.

Peru is the world's sixth biggest exporter of gold, and third largest exporter of copper and silver.

The updated trade balance forecasts follow lower estimates for 2014 growth recently given by the central bank and the finance ministry - 5.5 percent and 5.7 percent respectively, down from their shared forecast of 6 percent last year.

The central bank said it cut its growth outlook because mining activity in 2014 now looks less robust than before.

CENTRAL BANK UNLIKELY TO LOWER RESERVE REQUIREMENTS IN MAY

Central Bank President Julio Velarde said the monetary authority will probably not lower reserve requirements in May for commercial bank accounts held in the local sol currency as it has in previous months.

The bank has trimmed reserve requirements to boost liquidity every month since November, when it cut the benchmark interest rate by 0.25 percent and did not loosen reserve rules.

Velarde said he thinks that an "adequate" level of soles is now flowing through the economy.

"We are not thinking of lowering reserve requirements in May," Velarde told reporters.

In the past, Velarde has said he prefers loosening reserve rules more instead of cutting the interest rate again if he felt the need to encourage growth and inflation was not a concern.

Last year the economy grew 5 percent, or 5.6 percent if a new method for calculating gross domestic product were used, as the country's key mining exports tumbled and domestic demand mellowed.

Velarde also said on Friday that the central bank expects annual inflation by the end of 2014 to be 2.5 percent or 2.6 percent - higher than its December estimate of 2 percent.

The finance ministry also raised its view of inflation in 2014, to 2.8 percent from the 2 percent rate estimated in August.

Annual inflation cooled to 3.38 percent in March, still above the central bank's 1 percent to 3 percent target for the third straight month.

Earlier this week, Velarde deflected rare criticism of his handling of the economy from the country's finance minister, who said the central bank was intervening too much in the local currency market and not doing enough to prepare for a potential crisis.

Prime Minister Rene Cornejo said on Friday that the government respects the autonomy of the central bank, and that the finance minister was not pressing for policy changes.

(Reporting By Patricia Velez, Writing by Mitra Taj; Editing by W Simon, J Benkoe and Andrew Hay)

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