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Economic outlook

01/04/2020

Peru in 2020: Difficult times for the business environment

Donita Rodríguez, Head of Macroeconomic Analysis.

  • Due to the COVID-19 pandemic, the Peruvian economy is countering a shock of unprecedented nature and magnitude.
  • It is most likely that in March, GDP contracted by almost 20% compared with March 2019, generating a 5% fall in the 1Q2020. This has been the result of containment measures adopted by the Peruvian government (a 28-day mandatory social isolation) and of the production standstill observed in several countries in the world.
  • It is likely that the economic contraction in 2020 will be severe and long-lasting (annual GDP will fall by 5%). Consumption and investment will register their steepest falls of the past 20 years.
  • This scenario assumes, among other factors, a global recession and government measures accounting for 3% of GDP. In this exercise we have still not considered the additional measures announced by the government (which would raise impulse up to 12% of GDP).
  • Despite the adverse scenario in terms of economic growth, the depreciation of the Peruvian Sol against the U.S. Dollar will be limited and long-term financing costs will return to their average of the past 5 years (6.0%).

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OUR PERSPECTIVE

Peru's economic growth was dynamic in Q1 2025, although international environment risks have intensified.

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.

Political pressure on the government intensifies with the censure of Santivañez and new episodes of protest.

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.

Resumption of Congressional Functions: Oversight, Electoral Reforms, and Key Projects on the Short-Term Agenda

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.

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