The international economy is in a “repressed potential depression” – and loose monetary policy worldwide cannot fix the problem, Peru’s new President has told LatinFinance.
Indeed, the major factors behind global growth are likely to be demographic, rather than monetary, Pedro Pablo Kuczynski said.
“Never overestimate what the government can or can’t do,” he told LatinFinance. “We have an incredible example in the world today, which is this idea that with zero interest rates we’re going to get out of the semi recession the world is in.
“It’s clearly wrong because we’re not progressing at the moment.”
The weak global economy has hit Peru’s export sector, Kuczynski said. But overall the global monetary policy is not bad for the country.
“What the central banks are doing is not negative for Peru, but it is not effective in terms of restoring growth. Central banks are focusing on a tiny sub-segment of world economy. …. The growth of credit and money has slowed down dramatically despite what the central banks have been trying to do.
“Would it be worse if they had some different policy? I don’t know, that’s something to be discussed.”
Peru is somewhat protected from inflows of hot money, the former central banker added. Fiscal and monetary policy limited appreciation of the sol over the past decade, in contrast to neighboring countries which had sharp fluctuations.
“There aren’t so many things to buy here, for hot money. The government has a very low debt ratio, it’s not a big issuer.”
Kuczynski, who took office on July 28, was governor of Peru’s central bank in 1966. LF