The Republic of Peru : Economic Perspectives
For 15 years, Peru has been an economic model, the country’s growth peaked at 6% on average between 2004 and 2012. Ever since, the country experienced economic difficulties and couldn’t reach such growth levels.
In 2020, GDP falls to -11.1% due to the Covid-19 pandemic and is expected to reach 8.5% in 2021 and 5.2% in 2022 subject to the post-pandemic global economic recovery.
Peru’s geography is divided into to part : mountainous regions (mineral deposits) and maritime territory (fishery resources) :
- The Primary Sector only contributes to 7% of GDP but employs up to 27% of the working population. Arable land in the country only occupies 1.7% of the territory because of its complex geographical features (arid coast, rugged Andes and dangerous jungle). Peru’s main cotton, sugar cane, coffee, wheat, rice, maize, quinoa and barley. Despite its little arable land, the country is one of the world’s leading exporter of artichokes, mangoes, citrus fruits, avocados and grapes.
- The Secondary Sector contributes to 30.2% of GDP and only employs 15% of the working population. Peru’s mining industry include the extraction of copper and gold. It is the largest producer of silver, the 5th largest producer of of gold, second largest producer of copper and the major supplier of zinc and lead.
- The Tertiary Sector contributes to 54.9% of GDP and employs nearly 58% of the working population. Tourism and construction remain the main activity along with the expansion of financial services and telecommunications thanks to a combined support of the government and the private sector.
With more than 32 million inhabitants, the 4th most populous country in Africa, Peru, is the South America’s 6th richest country with an estimated GDP of USD 225.86 Billion in 2021. The Covid-19 pandemic exacerbated a hard and unequal social situation in the country :
- Unemployment rate doubled to 13.6% across the country, a 9.7% drop was expected in 2021
- Informal economy grew with a high level of inequality and poverty rate of 20.2%
- Around 7 million Peruvians live in poverty, 44% in rural areas
- The hardest to reach areas, the Andean and Amazon regions, show the highest disparities in poverty.
| Population (2020 UN) | 32.51 million inhabitants |
|---|---|
| GDP / Capita USD (2021, IMF) | USD 10.0 |
| HDI (2020, UNDP) | 79th over 190 |
| Doing Business (2020 World Bank rank) | 75th over 190 |
| Corruption Perceptions Index 2021 | 36h over 180 |
| Unemployment rate (FMI 2021) | 9.7% |
On a Demographic point on view, the former Spanish colony, Peru, has a moderate population density with only 25 people per km². The capital is Lima and its local currency is the New Peruvian Sol (PEN). 98% the population is Christian (923% catholic and 5% evangelical), and 2% has traditional beliefs. Life expectancy at birth of 76.7 years (South America average is 74 years).
On a Political point on view, Since the election of Pedro Pablo Kuczynski in 2016, Peruvian political life has experienced a period of instability (in particular due to corruption issues). Forced to resign in March 2018, Pedro Pablo is replaced by his vice-president Martin Alberto Vizcarra. In the presidential election of June 6, 2021, radicale left candidate Pedro Castillo (Schoolteacher and farmer) was elected. Four governments have succeeded since his election and President Castillo was subject to impeachment attempt in December 2021, on suspicion of corruption.
On an Economical point of view, Peru recorded a budget deficit of -6% of GDP in 2020, expected to decrease in 2021 (-4.2%) and 2022 (-3.1%). Inflation has declined to 1.8% and is expected to remain stable over the next two years at 2%. From 2004 to 2019, thanks to the prudential fiscal policy, public debt has been reduced almost by half from 44.3% to 27.1%, one of the lowest in Latin America. However because of the pandemic, public debt increased to 35.4% of GDP and is expected to remain at this level for 2021 and 2022.
Following the crisis, the government implemented a program called « Reactiva Peru », aiming to support businesses and protect the vulnerable population through cash transfers, tax payment deferrals and credit guarantees for the private sector.
| Economic Indicators | 2019 | 2020 | 2021e | 2022e | 2023e |
|---|---|---|---|---|---|
| GDP ($ Billion current price) | 230.87 | 205.46 | 225.86 | 231.69 | 246.72 |
| GDP growth (%) | 2.2 | -11.0 | 10.0 | 4.6 | 4.5 |
| Inflation rate (%) | 2.1 | 1.8 | 3.1 | 2.5 | 2.3 |
| Public debt (% GDP) | 27.1 | 35.1 | 35.0 | 36.9 | 38.5 |
| Current balance (% GDP) | -0.9 | 0.8 | 0.4 | 0.1 | -0.4 |
Central Reserve Bank of Peru
The Board of Directors of the Central Reserve Bank of Peru (BCRP) decided to raise the reference interest rate by 50 bps to 4.0 percent, taking into account :
- Year-on-year inflation was 6.15 percent in February, above the target range due mainly to a surge in international food and fuel prices, as well as exchange rate depreciation.
- Significant increase in international energy and food prices so far this year, recently accentuated by international conflicts,
The BCRP expects inflation to return to the target range in the first half of next year.
Focus on Exports and Imports
In 2020, Peru was the 50th economy in the world in terms of GDP (current USD) (53rd in the total exports and 59th in total imports). The country exported USD 40.5 Billion and imported USD 34.7 Billion, resulting in a positive trade balance of USD 6.8 Billion.
The top exports of Peru are Copper Ore ($9.23B), Gold ($6.46B), Refined Copper ($1.8B), Petroleum Gas ($1.41B), and Animal Meal and Pellets ($1.19B). Peru exports mostly to China ($11.3B), United States ($6.36B), South Korea ($2.71B), Canada ($2.42), and Japan ($1.91B).
The top imports are Refined Petroleum ($2.18B), Broadcasting Equipment ($1.08B), Computers ($833M), Cars ($828M) and Crude Petroleum ($752M). It imports mostly from China ($9.91B), United States ($6.82B), Brazil ($1.77B), Chile ($1.46B) and Argentina ($1.41B).
