The international environment is becoming increasingly favorable for Peru. Over the past month, the global scenario has been defined mainly by three factors: the election of Joe Biden as President of the U.S., the successful progress of vaccines in their last stages of development, and the alarming increase in the number of infections and deaths from COVID-19 in some developed countries. Although the latter is holding back economic recovery in some countries, the first two events have significantly improved the prospects for global economic recovery for the upcoming year, specifically from its second half. The reaction of financial markets to these events has been positive. This, added to the accelerated economic recovery in China and the continued expansive monetary impulse at the global level, has created a favorable international environment for Peru.
In addition, at the local level there are four main drivers of economic activity. First, the public sector impulse increased significantly in October. Second, credit continues to grow at high rates. Third, private investment is recovering rapidly, mainly due to specific factors such as home improvements and the demand for information and communication technologies (ICTs). Fourth, the improvement in the public health situation has made it possible to continue the process of economic reopening.
Unfortunately, these improvements in the business environment have been overshadowed by the new political crisis. Thus, despite the improved global context and the greater dynamism of economic activity, the considerable uncertainty caused by the recent political crisis generated a significant risk to economic growth, as high uncertainty could delay the recovery of private investment in productive capacity increases.
Going forward, political uncertainty will be the main obstacle to economic recovery. The evolution of regulatory risk in the business environment, the relationship between the Executive branch and Congress, and the government’s ability to deal with the health and economic crisis will all be crucial to determine the pace of recovery in investment and formal employment in the upcoming months. These factors will be extremely important as the economic situation of families remains strongly deteriorated
The economy maintained a solid growth pace in Q1 2025, around 3.8%, slightly above expectations. Primary sectors, such as agro-exports and fishing, continued to rebound, although they were still affected by weather conditions in Q1 2024.
This month, the political agenda has once again focused on citizen insecurity. The death of a singer from a well-known musical group, allegedly at the hands of extortionists, sparked renewed criticism of the Minister of the Interior, who was censured by Congress, which in turn triggered new protests.
Despite growing criticism, President Dina Boluarte remains reluctant to remove him from office, as Santivañez plays a key role in her efforts to obstruct investigations against her and her inner circle, including her brother Nicanor Boluarte.
