Peru's Economy Faces Key Challenges Under Keiko Fujimori's Incoming Government
Peru's economy is showing signs of gradual recovery, with the Central Reserve Bank (BCR) revising GDP growth projections upward to 3.4% for the current year, largely driven by a projected 12.3% surge in private investment. This rebound is significant, as the average growth rate between 2016 and 2025 (excluding the pandemic years) was 2.8%, less than half of the 5.9% recorded between 2006 and 2015. Private investment, comprising 80% of total national investment, is expected to achieve its highest level in 14 years, fueled by both mining and non-mining sectors. However, the strong occurrence of the El Niño phenomenon poses a considerable risk, potentially slowing economic growth in 2026 and 2027, with its full impact dependent on the weather event's intensity. Preliminary data already shows a slowdown, with primary sector activities like fishing contracting significantly in May.
The incoming Peruvian administration inherits an economy showing positive macroeconomic indicators, particularly in private investment, which suggests renewed confidence. However, this recovery is fragile and significantly exposed to external shocks, most notably the El Niño climate phenomenon. The government's fiscal position is strained, with consistent deficits and reduced fiscal buffers, necessitating careful management and potentially difficult policy choices regarding public spending and debt. Addressing persistent poverty, which has shifted towards urban areas and is characterized by unstable incomes, requires a departure from traditional rural-focused strategies. The administration must balance immediate fiscal pressures, including potential El Niño-related expenditures, with long-term fiscal consolidation goals and the need for targeted social policies. Navigating legislative pressures that have led to increased public spending, despite fiscal constraints, will be a critical test of governance and fiscal discipline over the next decade.
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