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"Inflation in Peru: How It Can Impact the Budget and Lifestyle of the Poorest"



INFLATION IMPACTS THE POOREST

Meanwhile, Jorge González Izquierdo, economist and former Minister of Labor and Social Promotion, who participated in the XXV International Forum EXPOGESTIÓN 2022, organized by GS1 Peru, indicated that the BCR's inflation target range for each period is to maintain it between 2% or 3%. However, by reaching 8% in May and with an estimate that it would reach 8.4% in June, it will continue to affect the food price index, therefore, it will impact the most disadvantaged sectors that have lower incomes and probably would be entering poverty levels.


"This scenario demands quick attention from the authorities, firstly referring to the BCR, and secondly referring to the government of President Pedro Castillo, so that they efficiently dictate measures to alleviate the suffering of broad sectors of the population," said González Izquierdo.


FOOD AND FUEL PRICES RISING

Regarding the products most sensitive to inflation, economist Carlos Casas indicated that, in general, the products that are increasing in price are imported grains such as yellow corn, soy, and wheat, which impact products that Peruvians consume in their day, such as bread, chicken, noodles, flour, and oil. Another factor that is increasing food prices is the high price of fuels, which increases the cost of transportation.


"The cost of transportation is a significant part that goes into the product prices. Thus, this factor impacts even more on the sale costs of foods that reach a high price for the final consumer. Now, a lower local production of food is also expected, as we are still waiting for the arrival of fertilizers for the soon start of the agricultural campaign. However, we will not see this problem now, but later when there is some shortage," commented the specialist from the University of the Pacific.


LOWER PURCHASING POWER OF PERUVIANS

The economist from the University of the Pacific said that despite the minimum vital remuneration having been increased by nearly 10% since May, inflation will impact families' purchasing power, even less than what they had in the last 20 years. "Due to this situation, companies are adjusted to increase salaries, which will also affect their consumption capacity."


In that same context, economist González Izquierdo indicated that while food prices are rising, salaries are stagnant because there is no greater private investment that is a source of employment and productivity. "What is happening is that prices are above salaries, which causes the purchasing power of Peruvians to decline. This leads Peruvians to adjust their expenses."


"The situation is worrying because some people will be pushed into poverty. In the pandemic, poverty rose from 20% to 30%, now it is at 26%, but it did not return to the pre-pandemic level. However, with inflation, the poverty rate is expected to increase slightly for this year," projected the economist.


PROJECTIONS

Regarding estimates of the performance of the Peruvian economy, Casas said that the expected growth rate for the end of the year is between 2.5% to 3.5%. This growth will be driven by the increased public investment that regional governments and municipalities have been carrying out before their government period ends. "Although public investment registered a fall in the first quarter, I would expect it to be recovering strongly for this second quarter."


"And there is a light at the end of the tunnel! Despite the economic challenges facing Peru, there are organizations committed to helping those in need. Our organization has been working hard to provide assistance to low-income children and elderly affected by inflation. We won't leave them alone in these difficult times!


In addition, we are committed to the most vulnerable population in Ucayali, providing support and assistance in their time of need. Together, we can overcome these challenges and build a better future for everyone in Peru."



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