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Peru Peru’s GDP is expected to grow by 1.7% this year and by 2.9% in 2024. Political uncertainty, extreme weather events, high interest rates and inflation will constrain private consumption and investment. Slow budget execution by subnational governments will hamper public investment, partly offset by a recent package of measures to boost investment. The recovery in tourism and copper production will boost exports. Inflation is expected to slow and return to target by early-2024. The central bank should maintain a restrictive stance to anchor inflation expectations. Maintaining the planned fiscal consolidation path will ensure the sustainability of public debt. Implementing a tax reform to increase public revenues and enhance tax progressivity is needed to address pressing infrastructure and social needs. Expanding quality early childhood education will be key to reduce informality and increase female labour force participation, boosting potential growth. Social unrest and extreme weather are weighing on growth Economic activity has slowed sharply due to social unrest, extreme weather conditions, political uncertainty, high inflation, and monetary tightening. GDP contracted by 0.4% year-on-year in the first quarter of the year with construction, agriculture and tourism hardly hit. After a sharp decline at the beginning of the year, mining is recovering as social unrest and road blockades dissipate, and a newly established mine starts fully operating. Cyclone-related supply-chain disruptions in March added to the economic slowdown. Private investment was particularly hard hit in the first quarter of the year, declining by 12% with respect to the same quarter last year. Private consumption also slowed, with a modest yearon-year increase of 0.4%. However, other short-term indicators, such as electricity generation, suggest an ongoing recovery and historically high public investment growth in the first four months of the year provides support.
Peru
Source: INEI; and BCRP. StatLink 2 https://stat.link/a56wos
OECD ECONOMIC OUTLOOK, VOLUME 2023 ISSUE 1: PRELIMINARY VERSION © OECD 2023