The course taken by the Peruvian economy in 1999 was largely determined by the repercussions of the external shocks that had buffeted the country the year before. Output returned to a moderate 3.8% growth path,1 and there was also success on the inflation front, where a new record low of 3.7% was set. Economic recovery was largely confined to the primary sector, however, while the rest of the economy continued to flounder in the aftermath of the previous year’s recession. The tight credit conditions that hadled to an outflow of short-term foreign capital starting in late 1998 were compounded by financial difficulties in a number of sectors and the persistence of negative expectations for much of the year. The result was a contraction of domestic demand (-3%), which led to a drop in employment (- 6%) and a crisis situation in the financial sector. The privatization process ran out of steam, and less than half of the programme originally envisaged for 1999 could actually be carried out.

Related Subject(s): Economic and Social Development
Countries: Peru
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