By Robert Kozak
LIMA, Peru--Peru's government plans to cut taxes and boost
government spending to give a shot of growth to the weakening
economy.
For 2014, economists anticipate growth of just half of last
year's 5.8% or even less. This has spurred the administration of
President Ollanta Humala to use fiscal policy to help the economy
recover.
Finance Minister Alonso Segura said in a statement late Thursday
that the government will cut taxes, float about $1.0 billion in
bonds for short-term spending and speed public sector
investments.
That is aimed at boosting gross domestic product by an extra 2%
next year, bringing expansion to more than 5%.
"Fiscal policy is contributing to a recovery of the economy,"
the finance minister said.
Banco de Credito forecasts an expansion of 2.5% to 2.8% for this
year and 4.5% to 4.8% in 2015.
The anemic economic growth has been one reason Mr. Humala's
approval rating has worsened. Pollster CPI said Friday that the
president's popularity stood at only 26% in November.
Goldman Sachs forecasts growth in Peru's GDP of 3.6% in 2015
from 2.4% in 2014, buoyed by what it calls a mild recovery in fixed
investment and the acceleration of government consumption on the
back of stimulative monetary and fiscal policies.
The bank said finance ministry measures to "step up government
spending may boost the growth rate of public consumption and
investment beyond expectations, particularly when accounting for
favorable base effects associated with temporary disruptions to
fiscal implementation during most of 2014."
"On the other hand, spending by regional and local governments
may be constrained during most of 2015 by the inauguration of new
administrations," it said.
Peru's government will cut income-tax rates for individuals and
for companies and lower fuel taxes.
"The objective of this measure is to give an incentive for the
reinvestment of corporate profits and promote private sector
investments, which are welcome here in contrary to neighboring
nations that are considering increasing taxes," Mr. Segura
said.
Fernando Iberico, an economist with brokerage Inteligo, said the
planned measures should be approved quickly by Congress and "send a
clear signal to the business community regarding the government's
stance on private investment, which is to bet on structural
measures that will have an immediate impact."
Write to Robert Kozak at robert.kozak@wsj.com
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