Peru's once surging economy grinds to virtual halt

By Dana Ford

LIMA, April 15 (Reuters) - Growth in Peru's economy slowed to a virtual halt in February as the impact of the global downturn threatened to end nearly eight years of expansion in the Andean country.

Peru's economy, which for the last two years had been one of the fastest growing in the world, expanded just 0.19 percent in February from the same month a year ago, the country's statistics agency said on Wednesday.

It was the weakest monthly result since June 2001 and will put pressure on President Alan Garcia, who has promised to roll out a $3.2 billion fiscal stimulus package as he works to lift his approval ratings from the current 34 percent.

"The global recession is now having very tangible effects on local output, especially in manufacturing which is very sensitive to the external market," said Roberto Flores, economist at brokerage Centura SAB in Lima.

February's result -- which was well below forecasts of 1.8 percent and the 3.14 percent growth posted in January -- showed the economy has braked from last year's blistering pace of nearly 10 percent growth.

This year, the government forecasts growth of about 4 percent, though the latest data could prompt more downward revisions. Forecasts by economists in the private sector put 2009 growth as low as 1 percent.

During the commodities boom, Peru, a leading global metals exporter, enjoyed a virtuous circle of rising trade surpluses, stronger fiscal positions, surging demand and an expanding pool of credit for consumers.

The retail and construction sectors thrived to complement the traditional engine of mining. But key sectors are now contracting.

In February, the construction sector grew 4.73 percent and agriculture posted a gain of 3.96 percent, but fishing dropped 17.62 percent, manufacturing fell 7.45 percent and mining lost 2.01 percent.

Despite the slowdown, the jobless rate in metropolitan Lima, which is used as a proxy for the country, held steady at 9.3 percent in the three months through March, from the same period a year ago.

The average wage in Peru's capital, Lima, rose 8.9 percent to 1,060 soles ($343) from the year-earlier period.

(Reporting by Dana Ford; Editing by James Dalgleish)