Peru: Economic Growth

February 28, 2022

The Peruvian economy grew by 13.3% in 2021, which, although the highest rate over the past century, is mainly the result of the resumption of activities closed by the pandemic that led to a drop of 11.0% in 2020.  With this significant rebound in 2021, GDP closed slightly higher (0.8%) than in 2019.  In this context, employment still lags pre-pandemic levels.  The fact that the monthly rate of economic expansion has been declining since April 2021, however, when it reached 59.1% (compared to April 2020), should not be overlooked, closing the year with a growth of only 1.7% in December 2021. Thus, the prospects for 2022 and the years to come are underwhelming.  While official entities forecast growth between 3%-4% for 2022, private analysts expect a notably lower expansion in the range of 2%-3% for 2022 and the following years.

These figures likely reflect mistrust in the policies of the administration of President Castillo, since, in other circumstances, the favorable external environment has translated into growth rates of at least 5%-6%. The political tension and the inability to form a capable and cohesive cabinet has dented economic expectations. Furthermore, the appointment of unsuitable and/ot incompetent officials can have a permanent impact on the already weak public administration. If to this is added the prospect that private investment will grow little if at all in the coming years, potential GDP will be affected and with it the capacities for growth in the medium term.  The Castillo administration still has room to maneuver, but has yet to indicate its intention to pay greater heed to economists.