UPDATE 1-Peru sees trade deficit instead of surplus this year, higher inflation
LIMA, Aug 28 (Reuters) - Peru will likely post a $720 million trade deficit this year - the first gap in more than a decade - instead of the $644 million surplus the government had forecast in May, the finance ministry said on Wednesday.
Peru will also probably register a trade deficit of around $485 million in 2014 instead of the $708 million surplus forecast earlier, the finance ministry said in a periodic report.
The Andean country's mineral exports have been hit harder than expected this year by softer demand from buyers including China and weaker global prices.
"In terms of our traditional exports we are seeing two effects - decreased volumes of output and decreased prices," Finance Minister Luis Miguel Castilla said in a televised presentation to Congress.
The central bank said on Tuesday that it expects even deeper trade deficits this year and next - a $1 billion trade deficit in 2013 and an $800 million gap in 2014.
In 2012, Peru posted a $4.5 billion trade surplus, which was half the size of the surplus in 2011.
Peru, a global miner that relies on shipments of minerals like copper, gold and silver for about 60 percent of its export earnings, has not posted a trade deficit since 2001.
Peru's economy has slowed this year on slacking exports and somewhat milder domestic demand, and Castilla said on Tuesday that the economy would probably expand 5.7 percent instead of the 6.3 percent estimated earlier.
On Wednesday the finance ministry also said it was raising the official forecast for inflation in 2013 from an earlier estimate of 2 percent to 2.6 percent, which is still within the central bank's target range of 1 to 3 percent.
The central bank has held the interest rate steady at 4.25 percent for more than two years.
The government is also now expecting a wider current account deficit in 2013 - 5 percent of gross domestic product (GDP) instead of 4.4 percent - and a smaller fiscal surplus of 0.3 percent of GDP instead of 0.7 percent.