Peru: Country Context
In the early 2000s, Peru achieved impressive economic growth and poverty reduction, establishing itself as an upper-middle-income country. Aided by structural reforms from the 1990s and revenues from the mining sector, the country strengthened its economic stability through sound macroeconomic frameworks, such as the independence of the Central Bank, strong financial regulations, and fiscal prudence policies. Favorable global conditions also played a role, fostering growth that led to significant poverty reduction and improved income levels.
Yet, Peru now faces challenges that threaten this progress. Recent economic slowdowns, widespread informality, and stalled reforms have impacted growth, compounded by the COVID-19 pandemic and persistent political instability. Annual growth dropped below 3% between 2020 and 2023, too low to reverse rising poverty, now at 29%. Increasing insecurity, labor informality, and illegal activities, including unregulated mining, have taken hold, further hindering development. Furthermore, Peru’s political environment, marked by frequent shifts in leadership, has eroded investor confidence. Since 2016, six presidents have taken office, disrupting continuity and stability. In 2023, private investment dropped by 5.6% as political uncertainty and institutional weakness grew, impacting the government's ability to implement effective policies. With upcoming elections in 2026, the political landscape remains uncertain, impacting Peru’s economic outlook. Infrastructure and essential services also face critical gaps. Around 30% of households lack access to basic services, with limited urban planning and ongoing challenges in decentralization and subnational governance. Efforts to close these gaps are underway, yet technical skill shortages and corruption continue to stall effective service delivery.
Despite these challenges, Peru has maintained resilient economic fundamentals. Strong institutions, such as the Central Bank and Ministry of Economy, provide stability and ensure a steady currency and controlled inflation. The country’s rich natural resources, particularly in mining, remain an important asset. However, addressing environmental and social challenges in this sector through sustainable practices remain essential for future growth. The Paris Agreement and green financing initiatives, like green taxonomy, will be crucial in supporting this transition to a more sustainable economy.