The world's second-largest economy, China, is grappling with structural challenges and the potential for a trade war with the US. If China's economic deceleration continues, implications for Peru's GDP growth are anticipated.
Peru directs one-third of its exports to China. The Ministry of Economy and Finance (MEF) estimates that each percentage point drop in China's GDP could reduce Peru's economic growth by 0.82 percentage points. Daniel Velandia, chief economist of Credicorp Capital, states, "What happens with China is extremely important for Peru."
Projections for China's 2025 economic growth suggest a decrease from the 5% recorded in 2024. The IMF forecasts an expansion of 4.6%, while BBVA projects 4%. Hugo Perea, chief economist for Peru at BBVA Research, notes, "China has already left behind the times of [growth rates] of 8%, 9% or 10% and is now in a process of deceleration, more due to structural problems than cyclical ones."
China faces challenges in its real estate and financial sectors, alongside an economic oversupply. The possibility of a trade war with the US adds further risk. BBVA projects that tariffs of 60% could reduce China's GDP by one point, affecting copper demand and prices, as noted by former Minister of Economy, Luis Castilla.
In scenarios where China's growth falls below 4%, Peru's economy could be severely impacted. However, Chinese authorities are expected to announce new economic measures. Castilla believes, "I think they will do everything in their power to avoid or mitigate a fall in their economic growth."
Elmer Cuba, a partner at Macroconsult, suggests that the risk of a US-China trade war is more limited for Peru, with copper demand for electromobility projects potentially supporting metal prices. please give this article a short, descriptive, and specific headline without using unnecessary capitals.
Source: Blueberries Consulting
