Peru Economic Outlook
Year-on-year GDP growth cooled in Q4: Consumer spending and exports weakened amid high inflation and nationwide protests following an attempted coup by former President Pedro Castillo and his subsequent imprisonment. Available data suggests activity remains subdued in Q1. The unemployment rate rose in January, inflation remained stuck above 8% in January-February, and interest rates were higher than in Q4 in the same two months. More positively, in late February, the government announced the launch of several public-private projects worth around USD 9 billion to boost activity and calm social unrest. Meanwhile, many of the country’s copper mines resumed full activity and began sending the mineral ore to ports for export again in early March, following three months of reduced activity.
Inflation came in at 8.6% in February, down from January’s 8.7%. It thus remained significantly above the Central Bank’s target range of 1.0–3.0%. Inflation should gradually fall this year as the lagged effects of higher interest rates curb domestic demand and supply disruptions ease. A looser fiscal policy stance and potential FX weakness pose upside risks.