By Teresa Cespedes
LIMA, July 15 (Reuters) - Peru’s annual growth rate quickened to 4 percent in May for the first time since 2014, reaching its potential pace thanks to a copper mining surge that has offset relatively weak domestic demand, the government said Friday.
The economy expanded by 4.88 percent in May from the same month a year ago, the third-fastest monthly pace in more than two years as mining activity jumped 36.7 percent year-on-year, according to data from statistics agency Inei.
The finance ministry said that growth would continue to accelerate in coming months, forecasting a recovery in private investments and a boost from the first anchovy fishing season, which started this month after months of delays.
Soaring output from new copper mines, especially MMG Ltd’s $7.4 billion Las Bambas deposit, has revived growth in Peru that slowed sharply in 2014 on a drop in mineral prices and public and private investments.
But manufacturing has continued to contract this year, and sectors not driven by exports, such as retail, construction, agriculture and restaurants and hotels, grew by less than 3 percent year-on-year in the first five months of the year.
In a sign that recovering growth has yet to translate into broad gains, the unemployment rate from April to June crept up to 7.0 percent from 6.8 percent in the same period in 2015.
Still, the government of President Ollanta Humala touted the latest growth data as a sign that its efforts to revive growth through increased government spending and lowered tax rates were delivering results ahead of the July 28 transfer of power to President-elect Pedro Pablo Kuczynski.
“The current administration is leaving the economy at a cruising speed,” Finance Minister Alonso Segura said in a statement, noting stronger construction activity in recent months.
The government and central bank both view the annual potential growth rate, the pace at which the economy can expand without stoking inflation, at about 4 percent.
Kuczynski aims to raise that pace to at least 5 percent through infrastructure projects and lower taxes to stimulate investments, though some of his proposed reforms will require the approval of the opposition-controlled Congress.
In all of last year, gross domestic product rose 3.3 percent, up from 2.4 percent in 2014 but well under previous years when growth topped 5 percent during years of high mineral prices.
Reporting by Teresa Cespedes; Additional reporting and writing by Mitra Taj; Editing by Chizu Nomiyama and Matthew Lewis