Peru's economic activity will continue to expand despite political uncertainty.
Peru's gross domestic product (GDP) growth will remain stable over the next two years, reaching 2.8% in 2025 and 2.6% in 2026, according to the latest OECD economic outlook report, which forecasts an expansion of 3.1% by the end of 2024 and reiterated the risk posed by political uncertainty.
The latest report from the Organisation for Economic Co-operation and Development (OECD) details that private investments will recover moderately, although political uncertainty may slow its pace, while inflation is expected to remain around the 2% target.
"There are significant risks on the horizon. Political uncertainty may intensify in the run-up to the 2026 general elections, while rising insecurity and crime may hamper economic growth," the report said.
The Peruvian government has extended the state of emergency in 13 districts of Lima and one in neighbouring Callao to enlist the support of the Armed Forces in the fight against organised crime, following a series of murders in the capital by alleged gangs of hitmen and extortionists.
The OECD also noted that a slower recovery in China, Peru's main trading partner, and weaker copper prices "could hurt exports, government revenues and investment."
Similarly, frequent climate-related shocks, such as the El Niño phenomenon, pose risks of economic disruption and inflation spikes in Peru.
On the positive side, he stressed that private consumption could benefit from low inflation, the recovery of employment and the withdrawals from pension funds approved last March.
He added that exports will benefit from sustained global demand and inflation will remain close to the Central Reserve Bank's (BCR) target of 2%, but that "significant risks persist" due to geopolitical and domestic policy uncertainties.
In addition, Dina Boluarte's government plans to reduce the deficit during 2025-26 to comply with fiscal rules, although this will be "a challenge" due to persistent spending pressures.
Fiscal consolidation is planned for 2025-2026, with the aim of reducing the fiscal deficit to 2.2% of GDP in 2025 and 1.8% in 2026, he said.
The OECD report suggests that to create the fiscal space needed for infrastructure and social investment, it will be essential to "improve the efficiency of public spending" and boost revenue generation.
