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Peru GDP growth is projected to decline to 0% this year, and to gradually pick up to 2.3% in 2024 and 2.7% in 2025. High interest rates and inflation, political uncertainty and severe weather are constraining domestic demand. Government efforts to revamp infrastructure will support investment, despite high interest rates and implementation challenges. Tourism and copper production are set to rebound, enhancing exports. Inflation is expected to continue to slow and reach the 1-3% target range by early 2024, supporting private consumption. There is room for further gradual monetary easing, as inflation and inflation expectations are falling towards the target. The planned gradual reduction of the fiscal deficit over the next years should be implemented in adherence with fiscal rules to maintain low public debt and rebuild fiscal buffers. A fiscal reform to increase public revenues and spending efficiency is needed to address pressing infrastructure and social needs. A comprehensive strategy to fight widespread informality, including lower non-wage labour costs and better skills, would boost productivity and equity. El Niño is weighing on economic activity After a first quarter disrupted by social unrest, economic activity declined further in the second and third quarters of 2023 due to the El Niño adverse impact on fisheries, agriculture and related industries. GDP declined by 0.6% between January and September, with respect to the same period last year. Mining has sustained growth, bouncing back as social unrest subsided and a new copper mine began its operations, supporting exports and reducing the current account deficit. However, this has not offset weakness in private consumption and investment. Business confidence has improved slightly but is still very weak. A significant increase in central government public investment has helped to mitigate the economic slowdown, despite the decline in subnational government investment.
Peru
Source: INEI (Instituto Nacional de Estadística e Informática); and Central Reserve Bank of Peru. StatLink 2 https://stat.link/tk6b23
OECD ECONOMIC OUTLOOK, VOLUME 2023 ISSUE 2: PRELIMINARY VERSION © OECD 2023