Peru: Economic and Political Overview
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An economic model country for the past two decades, Peru's growth peaked at an average of 6% between 2004 and 2012. Even though Peru faced economic difficulties in the past couple of years due to the pandemic, the country's economic situation has improved, with growth levels reaching an estimated 10% in 2021. The strong recovery was mainly driven by a boost in Peru’s main exports (copper, gold, silver, zinc), higher commodity prices, and rising demand from China and the US, as well as continued government support to households and businesses, which increased consumption. The Peruvian economy is expected to continue growing in the coming years, albeit at a slower pace, with the IMF predicting a GDP growth of 4.6% for 2022 and 4.5% for 2023.
Peru recorded a budget deficit of 5.3% of the GDP in 2021, but it is expected to decrease to 4.1% in 2022 and remain stable in 2023. Inflation increased to 3.2%, but the Central Bank should tighten its monetary policy to keep inflation withing the target of 2%, with the IMF forecasting inflation rates at 2.5% in 2022 and 2.3% in 2023. Furthermore, although public debt increased to 35% of GDP in 2021, mainly due to the impacts of the pandemic, Peru still has one of the lowest debt-to-GDP ratios of Latin America thanks to the prudential fiscal policy in force since the early 2000s. Additionally, the IMF anticipates the government debt to remain relatively stable in 2022 and 2023, at 36.9% and 38.5%, respectively. In order to address the situation of economic crisis related to the pandemic, the government developed a comprehensive economic relief and aid to support companies and protect vulnerable population through cash-transfer, tax payment deferrals and credit guarantees for the private sector. The fiscal stimulus package combines with the country's high vaccination rates pushed Peru to a strong recovery in 2021 - a trend that's expected to continue in 2022.
Although the unemployment rate in Peru doubled during the early stages of the pandemic, unemployment decreased in 2021, reaching 8.7%. According to IMF estimates, the country's unemployment rate is expected to return to pre-pandemic levels in 2022 and remain stable, at 6.5%, in 2023. 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 20.2%. About 7 million Peruvians now live in poverty, 44% of whom are in rural areas. There are serious regional disparities in poverty throughout the country, with the highest numbers being in the Andean and Amazonian regions.
| Main Indicators | 2020 | 2021 | 2022 | 2023 | 2024 |
| GDP (billions USD) | 205.82 | 225.94 | 239.33 | 253.76 | 266.83 |
| GDP (Constant Prices, Annual % Change) | -11.0 | 13.6 | 2.7 | 2.6 | 3.2 |
| GDP per Capita (USD) | 6,145 | 6,679 | 7,005 | 7,353 | 7,656 |
| General Government Balance (in % of GDP) | -6.0 | -3.7 | -2.8 | -2.6 | -2.3 |
| General Government Gross Debt (in % of GDP) | 35.0 | 36.4 | 34.8 | 35.7 | 35.7 |
| Inflation Rate (%) | 1.8 | 4.0 | 7.5 | 4.4 | 2.5 |
| Unemployment Rate (% of the Labour Force) | 13.9 | 10.9 | 7.6 | 7.5 | 7.4 |
| Current Account (billions USD) | 1.55 | -5.66 | -7.28 | -5.40 | -5.44 |
| Current Account (in % of GDP) | 0.8 | -2.5 | -3.0 | -2.1 | -2.0 |
Source: IMF – World Economic Outlook Database, October 2021
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 1.7% of the territory. Still, the sector is fairly significant compared to the size of the country's arable land. Agriculture contributes to 7.5% of Peru's GDP and employs 27.3% 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. Although all sectors of the Peruvian economy were negatively impacted by the pandemic, agriculture remained strong through 2020 and 2021, mainly because small farmers whose livelihoods depend on their harvest kept working despite the COVID-19 crisis. Another reason for the stability felt in the agricultural sector is that Peru only imports about 15% of the food it consumes and, with a substantial amount of food being produced in the country, harvests didn't stop.
The industry sector generates 30.4% of the GDP, employing 15.2% of the active population. Peru has a large and dynamic mining industry, mainly for copper and gold extraction. Peru has been a mining economy since colonial times, and the country is the world’s top producer of silver, the fifth 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. Furthermore, although the Peruvian government has tried to disperse industrial production, the country's main industries are within the greater Lima area. In 2021, the industry sector saw a significant recovery from the impact of the COVID-19 pandemic, bolstered by soaring growth in one of Peru's key sectors: mining.
The tertiary sector contributes 54.1% of the GDP and employs 57.4% 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. However, tourism was one of the hardest hit sectors during the early days of the pandemic. Still, as vaccination rates rose and people's mobility increased in 2021, tourism saw a steady recovery - as well as the entire services sector.
| Breakdown of Economic Activity By Sector | Agriculture | Industry | Services |
| Employment By Sector (in % of Total Employment) | 27.4 | 15.2 | 57.4 |
| Value Added (in % of GDP) | 7.0 | 35.0 | 49.2 |
| Value Added (Annual % Change) | 3.7 | 16.4 | 11.8 |
Source: World Bank, Latest Available Data. Because of rounding, the sum of the percentages may be smaller/greater than 100%.
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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.}}
Economic freedom in the world (interactive map)
Source: Index of Economic Freedom, Heritage Foundation
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.
Source: The Economist Intelligence Unit - Business Environment Rankings 2020-2024
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Latest Update: March 2023
