Peru

Abstract

Peru’s very strong policy framework has helped it achieve impressive macroeconomic outcomes and reduce vulnerabilities. Growth has been particularly robust, averaging nearly 5¼ percent over the past 15 years, consistently above the average for the LAC region, while the inflation targeting regime has helped keep inflation low and expectations well anchored. Prudent fiscal management has reduced government debt to very low levels. Very strong financial sector regulation and supervision have contributed to preserving financial stability. External vulnerabilities have been reduced and poverty has been cut by more than half since the turn of the century. In recent years, macroeconomic performance has been adversely affected by a combination of external, domestic, and weather-related shocks that have slowed Peru’s growth momentum. Against this background, the Covid-19 pandemic has posed an unprecedented challenge, which is pushing the economy into a recession. Peru has to date shown remarkable financial resilience when compared to other emerging market economies, both within and outside the region, not least because large buffers have allowed the government to respond with a very strong policy package to contain the pandemic and mitigate the economic fallout.