Peru

Peru’s near-term cyclical outlook remains constrained by election-related uncertainties, with growth forecasts moderating to around +2.7% and +2.5% in 2026 and 2027, respectively, amid global and domestic policy ambiguity. High commodity prices and favorable terms of trade partially cushion the slowdown, but consumer and business confidence could falter as transition dynamics unfold. The recent pattern of pension-fund withdrawals and fiscal tightening may temporarily prop up private consumption, but these measures carry longer-run trade-offs for savings and capital markets. Global headwinds – including slower growth in key partners like China and potential commodity price shifts – present downside risks to exports and investment flows. Crime and insecurity also exert a cyclical drag on urban economic activity and tourism, highlighting socio-economic vulnerabilities that could feed back into short-term demand patterns and hinder labor market improvements. Monetary policy is expected to remain neutral and data-driven, anchoring inflation within the central bank’s target range and limiting volatility in financial conditions. 

Long-standing structural weaknesses temper Peru’s medium-term potential. Despite strong macro buffers, productivity growth has lagged due to regulatory inefficiencies and barriers to formalization that hinder SME growth and investment. OECD assessments recommend simplifying business licensing, labor and tax regulations and improving enforcement to broaden the formal tax base and enhance competitiveness. Institutional capacity at subnational levels remains uneven, constraining public investment effectiveness and project execution. Persistent informality and fragmented regulatory frameworks also raise compliance costs and reduce access to finance for smaller enterprises. Digital infrastructure and skills gaps further challenge productivity upgrades outside mining and large infrastructure sectors. Climate-related vulnerabilities – including earthquake and flood risks – require greater resilience planning to protect supply chains, particularly in agriculture and logistics. While foreign investment, especially in mining and partnerships like Chancay port, supports longer-term diversification, structural reforms to deepen value chains and innovation adoption will be critical for sustained competitiveness.