Peru’s perennial political volatility has not prevented it from pursuing sound macroeconomic policies and maintaining financial stability, even though it has undoubtedly prevented it from realizing its full potential. Following a decade or so of very rapid economic growth from 2002-13 in the context of the global, China-induced commodity boom, Peru’s more recent economic performance has been middling in the context of unstable domestic politics and considerable regulatory and bureaucratic obstacles holding back private investment. Despite this unfavorable domestic context, successive governments have managed to mainta macroeconomic stability and to make substantial progress in terms of economic development and poverty reduction, allowing Peru to become an upper-middle income country comparable to, if slightly poorer than Brazil, Colombia and Mexico.
> In the ten years leading up to 2013, real GDP growth averaged 6.5%. Following the end of the China commodity boom and in the context of increased domestic political instability, real GDP growth more than halved, slowing to 2.5-3.0% today. In recent years, investment as a share of GDP has fallen to below 20%, which is consistent with medium-term economic growth 2-3%.
> Peru has been characterized by macroeconomic stability and a disciplined policy framework. Despite low levels of government revenue and a high commodity dependence, it managed to weather various global shocks without experiencing broader financial instability. An independent central bank, a sound financial sector and disciplined fiscal policies have translated into low inflation, avoidance of banking sector crises and low government debt. At just over 30% of GDP, government debt is very low (even though half of it is denominated in foreign currency). Peru also benefits from a solid external financial position. Its foreign-exchange reserves are very large, covering more than 11 months of imports. Its current account is close balance and fully financed by net foreign direct investment inflows.
> Peru’s commodity dependence is high. According to the WTO, fuel and mining account for more than 50% of total exports, while agricultural products account for an additional 20%. China is Peru’ largest export market, followed by the United States, accounting for 32% and 13%, respectively.
> In the context of rapid-to-fair economic growth over the past 25 years, Peru reduced its poverty rate from slightly less than 60% to less than 30% today. Extreme poverty, defined as living on less than $2.15 a day, declined from 17% to less than 6% during the same period.
The short-term economic outlook is middling and global trade tensions represent a significant, if manageable risk, but a more stable political environment and more streamlined investment-related policies would help boost the medium-term economic outlook considerably. The short-term economic growth outlook is fair, but not exceptional with the IMF projecting economic growth of 2-3% over the next few years. Reliant on commodity exports, Peru, like many other Latin American economies, is highly sensitive to a decline in global commodity prices in the event of a greater-than-expected U.S. economic slowdown and even more so in the context of a broader global economic slowdown due to trade conflict. Structurally, however, Peru has significant potential to accelerate medium-term economic growth in view of increasing global demand for raw materials tied to green transition as well as countries seeking to gain access to important, critical raw materials in the context of geopolitical competition and international economic fragmentation. Greater political stability and a more forward-looking policy aimed at fast-tracking mining projects would help Peru unlock greater commodity and related infrastructure investment. Recent deregulation should go some way towards boosting the investment outlook. As during the aughties, higher investment would then lead to faster economic growth and higher government revenues, which would allow the government to pursue growth-enhancing investment policies in the context of macroeconomic discipline. Based on Peru’s recent historical experience, a combination of increased investment and increased government spending could help lift real GDP growth to 3-4%.
> The IMF forecasts real GDP growth of 2.6%this year, in line with the Fund’s medium-term projection of 2.3%. The IMF projects the investment ratio to remain below 20% of GDP over the medium term. This compares unfavorably to the almost decade and a half leading to COVID-19 when the ratio exceeded 20% of GDP and real GDP growth was closer to 4%.
> According to the IMF, $62 billion worth of mining investment projects have been stalled for several years now due to bureaucratic complexity and social conflicts. According to E&Y, Peru’s mineral reserves investment pipeline is worth $ 55 bn and foreign investor interest remains high, particularly related to copper, gold, and other essential minerals. This is equivalent to 20% of GDP.
> According to the Peruvian National Society of Mining, Petroleum, and Energy (SNMPE), between 2026 and 2028, new mining projects representing an investment commitment of USD 6.9 billion are expected to break ground, reinforcing Peru’s standing as a key mining hub. The bulk of the investment will be allocated to cooper (> 70%), gold (> 10%) and iron ore (9%).
> The mining sector accounts for 9% of GDP. Copper is the most important export product, followed by gold, zinc, iron and lead. Peru is also one of the leading producers of zinc, copper, silver, tin, lead and mercury. Peru sits on 10% of global copper, 4% of gold, 22% of silver, 9% of zinc and 5% of lead reserves, according to the US Geological Survey.