WORLD BANK REPORT CRITICISES PERU ECONOMIC PLAN A confidential World Bank report on the Peruvian economy has said the government's strategy does not offer good prospects for medium and long-term growth and is likely to lead to an early renewal of inflationary pressure. The report, published today by the economic monthly, The Peru Report, said the success of president Alan Garcia's government in stimulating output last year to achieve a growth in gross domestic product of over eight pct "represents gains in the short term at the expense of the long." Government officials had no immediate comment on the report, which advised a reduction in the overall size of the public investment program and greater emphasis on the preservation of Peru's export potential. The report said that although the government had succeeded in cutting inflation from 250 pct a year in the first half of 1985 to under 70 pct, its stabilisation and reactivation program was encountering rising difficulties. "An early renewal of inflationary pressures, linked to monetary expansion, exchange rate devaluation and an easing of price controls, appears not improbable," it added. The world bank report said the government's policies had reduced inflation and short-term increases in consumption at the apparent cost of price distortions, overvaluation of the currency, balance of payments disequilibrium, reserve losses, and sharply diminished creditworthiness. It said unless the government took action quickly to fix a competitive exchange rate and control the public sector deficit, "the higher the probability will be that the government will eventually have to resort to drastic curtailment of domestic demand and either sharp devaluation or still further controls on imports in order to stem inflation and support the balance of payments." It said the bank would place more emphasis on the preservation of peru's export potential, external links and overall economic efficiency. The government's incentive policies towards the mining and petroleum sectors, among its main traditional exports, suggested that it did not accord high priority to their economic viability, it added.