December 20, 2019 / 5:54 PM / a month ago

UPDATE 2-Peru's Central Bank gloomier on 2019 growth projections

(Adds comment about mineral price and U.S./China trade war outlook)

By Maria Cervantes

SANTIAGO, Dec 20 (Reuters) - Peru’s central bank on Friday said it had reduced its economic growth projection for 2019 to 2.3% from 2.7% previously amid a slowdown in the global economy and lower public investment in the Andean nation.

The bank maintained its estimate for 3.8% GDP growth by 2020 in its latest macroeconomic projections report.

It saw a 2019 fiscal deficit of 1.7% of GDP compared with a previous 2.0% projection. It also said it expects a deficit of 1.7% in 2020 and 1.6% in 2021.

It projected inflation at 1.9% for 2019, down from 2.0% previously predicted, and maintained its projection of 2.0% inflation for 2020.

Peru’s central bank chief, Julio Velarde, said the bank had revised its growth projections downwards because of the poor performance of the key mining sector, as well as external factors and slowed domestic spending.

“That is the factor driving lower growth this year, and will also boost the recovery the next,” he said.

“This year, compared to 2018, we were hit by lower export volume and with that lower growth.”

Mining - principally of zinc and copper - accounts for about 15 percent of Peru’s gross domestic product, and minerals make up some 60 percent of export earnings.

On the positive side, the central bank report said that reduced trade tensions between the United States and China should favor higher prices of the minerals that Peru exports.

U.S. President Donald Trump spoke on Friday with Chinese President Xi Jinping and claimed progress on trade issues, but China said Xi accused the United States of interfering in its internal affairs. (Reporting by Maria Cervantes, writing by Marco Aquino and Aislinn Laing Editing by Chizu Nomiyama and Steve Orlofsky)

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