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LIMA, March 13 (Reuters) - Peru's economy is not recovering as quickly as expected because of a drop in public spending and that authorities must help get growth back on track, the central bank said on Friday.
Public investment fell 25 percent in January and February, according to Adrian Armas, the bank's chief economist.
"If public investment returned to the expected pace, we would see a strong recovery in economic activity," Armas said on a conference call with reporters.
Peru's economy grew 1 percent year-on-year in the fourth quarter amid a mining and fishing slump - the weakest reading since 2009 and well below the 5 percent pace that the central bank views as the country's potential growth rate.
The economy grew at a slower-than-expected 1.7 percent in January on the year, the president of the central bank told Reuters on Friday.
Armas emphasized that a recovery in the first quarter was underway, but he called it "slow."
"Why slow?" Armas asked. "Because unfortunately we're seeing a contraction in public investment ... that means the economy is recovering, but not at the level expected."
A 24 percent rise in public spending by the central government has helped offset the 50 percent drop in investments by local governments, which are in transition following elections last year.
"Public works projects are paralyzed," Armas said. "It's important for subnational authorities to prepare their budgets quickly."
Armas added that more must be done to cut red tape that is holding up private investments.
The central bank held the benchmark interest rate unchanged at 3.25 percent on Thursday as the local sol currency trades near a six-year low. (Reporting by Mitra Taj; Editing by Chizu Nomiyama and Alan Crosby)