Peru Says Its Economy Has Grown 4.8% in ’86

The economy has grown 4.8% since January as a result of President Alan Garcia’s tight austerity program, government officials said Tuesday.

National Statistics Institute director Graciela Fernandez Baca meanwhile said inflation in August was 4%, down from July’s 4.6%.

She said inflation for 1986 is averaging 39.7% and that inflation for the 12 months ending in August was 57.2%.

But Apoyo S.A., one of Peru’s leading economic study groups, put the cost of living increase for August at 4.7% and said over the last four months prices have risen each month more than the month before.

Prime Minister Luis Alva Castro was quoted Tuesday in Lima newspapers as saying Peru, with this year’s 4.8% growth rate, is expected to reach the 6% growth predicted for the year end by Garcia.

In 1985 Peru’s economy grew only 1.6%. The year before it grew 4.7% after suffering a 11.9% drop in 1983, due mainly to a drastic fall in agricultural production and the collapse of prices of Peru’s mineral exports.

The Lima newspaper El Comercio quoted Alva Castro as saying the upturn in production “demonstrates the success of our emergency program.”

After taking office in July, 1985 Garcia imposed a package of austerity measures to revive the economy. The program included a devaluation of the local currency, a freeze on wages and the dollar exchange rate and a series of price controls.

Inflation during the first year of Garcia’s government was 57.2%, down from the 180.6% it reached the last 12 months of the previous government.

After taking office Garcia placed a ceiling on payments on the country’s $12-billion foreign debt, and on July 28 announced he would also limit payments on the country’s $2 billion private debt.

On Aug. 15 the International Monetary Fund declared Peru ineligible to receive any more aid from the organization. Peru paid only $35 million of a $186-million debt that was due that day.

Peru has been using the income scheduled for its creditors to spur internal growth and hold down inflation by maintaining an artificial exchange rate for the dollar.