Construction output in Peru plummeted in April, dropping by a record low of 89.7% year-on-year and by 34.9% between January and April, according to data released on 15 June by the National Institute of Statistics and Informatics (INEI).
This was the steepest contraction in the history of the series and provides a clearer indication of the deepening and widening economic effects caused by the Covid-19 pandemic. April’s figure also compares to a year-on-year drop of 13.3% in the first quarter of 2020.
INEI said that the significant drop in construction output in April was due to stopping private works and the restrictions imposed by the Government of Peru to contain the spread of the virus, which led to a significant drop in local cement consumption (-98.6%) and a decline in the progress of public works (-74.9%).
By administrative divisions, construction activity fell the most at the local government level, dropping by -85.6% in April followed by -63.9% at the regional government level and by -47.7% at the national government level. Among the worst-affected construction subsectors were infrastructure (e.g. roads and bridges), water and sewerage, and non-residential buildings (e.g. commercial and institutional).
According to the Lima Chamber of Commerce, over 85,000 construction companies and more than one million workers in the sector were affected by the government measures to limit the spread of the outbreak as most construction activities were halted from mid-March through May.
Reflecting on these developments, GlobalData has further cut its forecast for Peru’s construction industry to 14%, down sharply from the previously projected contraction of -4% in May. The current output projections are in line with the deep decline in economic activity in the first half of the year and subsequent gradual recovery in the second half of 2020 as most construction works are expected to be reactivated towards the end of this quarter.
GlobalData expects the gradual reopening of construction activities and copper mines across the country to support the rebound in the industry in the second half of the year. In early May, the government approved the sanitary protocol to reactivate construction projects in areas that require less labour as part of the first phase of its ongoing plan to reactivate the country’s economy.
Moreover, on 4 June, the government announced that private investment projects along with public works, public-private partnerships, and projects under the Comprehensive Plan for Reconstruction with Changes were allowed to resume work from 5 June as part of the second phase of its ongoing economic reactivation plan.
However, further downward revisions to Peru’s construction output forecasts are likely if the coronavirus outbreak worsens and the government restrictions to control its spread are further extended.
Peru has the second-highest number of confirmed coronavirus cases in Latin America after Brazil and the third-highest recorded Covid-19 deaths in the region, ranking below Brazil and Mexico. On 17 June, the country had 240,908 confirmed cases and 7,257 fatalities.
Despite being one of the first countries in the region to implement lockdown restrictions, the number of new Covid-19 cases in Peru continues to rise, in part, due to difficulties enforcing the containment measures and distributing associated support, given the high labour informality and low financial penetration.
On 22 May, President Martin Vizcarra announced his government had extended the national quarantine until 30 June due to the ongoing increase in the number Covid-19 cases throughout the country.