Peru flag Peru: Economic and Political Overview

The economic context of Peru

Economic Indicators

In the context of robust economic growth spanning the past 25 years, Peru has encountered numerous setbacks in recent years. Peru experienced an economic downturn as its GDP declined in the first and second quarters of 2023, attributed to decreased private investment and consumption, possibly stemming from protests and increased political uncertainties. Additionally, vital sectors such as agriculture, construction, and fishing were adversely affected by climatic events. The latest projections from the Banco Central de Reserva del Perú (BCRP) pointed to a negative growth of 0.5% in 2023, while projecting an annual growth rate of 3% over 2024/25 thanks to the recovery of some key industries, including agriculture.

The fiscal deficit was projected to increase to 2.1% of GDP in 2023, primarily driven by a significant decrease in fiscal revenues, which outweighs a lesser reduction in expenditures. The decline in revenues is largely attributed to lower economic growth and copper prices. Meanwhile, expenditures have decreased due to the winding down of pandemic-related spending, despite higher salaries, and the implementation of Con Punche Peru and measures to address climatic events. The IMF anticipates the deficit to decrease to 1.9% in 2024 and 1.6% in 2025, as revenues increase with the resurgence of economic activity, while current spending remains inflexible amidst the delicate political equilibrium. Fiscal discipline has allowed Peru to keep the public debt-to-GDP ratio at a low level: it stood at 33.9% as of 2023, and is expected to remain stable over the forecast horizon. Data from the Banco Central de Reserva del Perú pointed to an inflation rate averaging 3% in 2023 (compared to 8.5% one year earlier), with rate gradually returning towards the 2% target by 2025.

Although the unemployment rate in Peru doubled during the early stages of the pandemic, unemployment has been decreasing and, in 2023, stood at 7.6%. According to IMF estimates, the country's unemployment rate is expected to remain stable in 2024 and 2025, at 7.4% and 7.3%, respectively. However, the informal economy continues to employ a large part of the active population. Moreover, the country has high levels of inequality, with a significant concentration of wealth, and a poverty rate of 27.5% (World Bank). There are serious regional disparities in poverty throughout the country, with the highest numbers being in the Andean and Amazonian regions.

 
Main Indicators 20222023 (E)2024 (E)2025 (E)2026 (E)
GDP (billions USD) 244.59264.64277.16291.09305.72
GDP (Constant Prices, Annual % Change) 2.71.12.73.13.0
GDP per Capita (USD) 7,1597,6697,9528,2698,599
General Government Balance (in % of GDP) -2.0-2.1-1.9-1.6-1.2
General Government Gross Debt (in % of GDP) 34.333.934.033.532.7
Inflation Rate (%) n/a6.52.92.12.0
Unemployment Rate (% of the Labour Force) 7.87.67.47.37.2
Current Account (billions USD) -9.91-5.08-5.89-5.01-4.80
Current Account (in % of GDP) -4.1-1.9-2.1-1.7-1.6

Source: IMF – World Economic Outlook Database, October 2021

Main Sectors of Industry

Peru’s varied geography is reflected in the country’s economy. The abundance of resources is found mainly in mineral deposits in the mountainous regions, while its extensive maritime territory has traditionally yielded excellent fishing resources. However, due to its complicated geographical features (such as the arid coast, the rugged Andes and the hard-to-reach jungle), Peru has a rather small agricultural area, which occupies only 20% of the territory. Still, the sector is fairly significant compared to the size of the country's arable land. Agriculture contributes to 7.8% of Peru's GDP and employs 26% of the active population. The country’s main agricultural products are cotton, sugarcane, coffee, wheat, rice, maize, quinoa, and barley. Peru is also one of the world's leading exporters of artichokes, mangoes, citrus, avocado, and grapes. In 2023, the agricultural sector experienced its first contraction in several years, declining by 3%, as a result of the droughts in late 2022, the coastal El Niño phenomenon , and Cyclone Yaku, according to the latest forecasts from the Banco Central de Reserva del Perú.

The industry sector generates 34% of the GDP, employing 17% of the active population. Peru has a large and dynamic mining industry, mainly for copper and gold extraction. The country has been a mining economy since colonial times, and the country is the world’s third producer of silver, the eleventh producer of gold, the second producer of copper, and an important supplier of zinc and lead. Large mining has begun during the past years, which increased even more the importance of the mining sector. The country also has large reserves of natural gas and oil, although Peru is a net energy importer. The main manufacturing activities are textiles, consumer goods, food processing and fish products. In 2023, the industrial sector recorded its third-worst decrease in the last thirty years, contracting an estimated 6.4% (data Sociedad Nacional de Industrias).

The tertiary sector contributes 49.5% of the GDP and employs 57% of the workforce. The sector consists of tourism, financial services and telecommunication, all of which have boomed due to a combined effort from both the government and private sector. The tourism and construction sectors, particularly, are very well developed. In the first seven months of 2023, the tertiary sector contracted by 0.4% (data Central Bank).

 
Breakdown of Economic Activity By Sector Agriculture Industry Services
Employment By Sector (in % of Total Employment) 27.9 17.0 55.1
Value Added (in % of GDP) 7.2 34.8 49.4
Value Added (Annual % Change) 3.0 1.3 3.3

Source: World Bank, Latest Available Data. Because of rounding, the sum of the percentages may be smaller/greater than 100%.

 

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Indicator of Economic Freedom

Definition:

The Economic freedom index measure ten components of economic freedom, grouped into four broad categories or pillars of economic freedom: Rule of Law (property rights, freedom from corruption); Limited Government (fiscal freedom, government spending); Regulatory Efficiency (business freedom, labour freedom, monetary freedom); and Open Markets (trade freedom, investment freedom, financial freedom). Each of the freedoms within these four broad categories is individually scored on a scale of 0 to 100. A country’s overall economic freedom score is a simple average of its scores on the 10 individual freedoms.}}

Score:
67,7/100
World Rank:
50
Regional Rank:
7

Economic freedom in the world (interactive map)
Source: Index of Economic Freedom, Heritage Foundation

 

Business environment ranking

Definition:

The business rankings model measures the quality or attractiveness of the business environment in the 82 countries covered by The Economist Intelligence Unit’s Country Forecast reports. It examines ten separate criteria or categories, covering the political environment, the macroeconomic environment, market opportunities, policy towards free enterprise and competition, policy towards foreign investment, foreign trade and exchange controls, taxes, financing, the labour market and infrastructure.

Score:
6.31/10
World Rank:
44/82

Source: The Economist Intelligence Unit - Business Environment Rankings 2020-2024

 

Country Risk

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Sources of General Economic Information

Ministries
Official list of ministries (in Spanish)
Ministry of Economy and Finances (in Spanish)
Ministry of Foreign Trade and Tourism (in Spanish)
Ministry of Foreign Relations (in Spanish)
Ministry of Agrarian Development and Irrigation (in Spanish)
Ministry of Energy and Mines (in Spanish)
Ministry of Development and Social Inclusion (in Spanish)
Statistical Office
National Institute of Statistics (in Spanish)
Central Bank
Central Reserve Bank of Peru
Stock Exchange
Lima Stock Exchange (in Spanish)
Economic Portals
Business News Americas
Observatório de la Economía de Perú
Economía latino-americana
 

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Latest Update: May 2024