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Peru’s President Dina Boluarte committed to supporting agriculture by allocating 3.36 bln sol (about USD 912 mln) to the Ministry of Agrarian Development and Irrigation (Midagri) in 2025, marking the highest allocation for the sector in recent years.
Peru’s economy grew by 3.33% in 2024, rebounding from a recession in 2023. The government forecasts continued growth of 3% in 2025, although concerns about a potential slowdown towards the end of the year due to the electoral cycle persist. The central bank left interest rates at 4.75%.
Despite strong economic growth projections for 2025, Peru’s upcoming April 2026 election is raising investor concerns. A record number of political parties are participating, which could lead to market volatility. Investors are wary of potential political instability after the 2021 election saw the currency plummet and $17 billion in capital flight, although the elected government did not dismantle the pro-market constitution.
Peru’s monthly Inflation fell by 0.09% in January, remaining within the central bank’s target range. The annual inflation rate stood at 1.85%. Peru’s central bank aims for inflation between 1% and 3%, with Governor Julio Velarde forecasting inflation could drop to 1% by March before rising again.
Peru plans to issue up to three sovereign bonds this year to finance its fiscal deficit. Finance Minister Jose Arista stated that fiscal spending would be gradually reduced. GDP growth is projected at over 3% in 2025 after expanding 3.3% in 2024.
Peru’s mining sector, accounting for 57% of FDI. With 93% of Peru’s mining investment coming from abroad, China leads at 20.8%, followed by Canada at 18.9%, and Mexico at 17.3%. Southern Copper, owned by Grupo México, is a major player, contributing 41% of its revenue from Peru, with significant investments in key projects like Tía María and Michiquillay.
Peru’s economy grew 3.93% YoY in November, surpassing the 3.2% growth forecast. The economy also expanded 1.12% compared to the previous month. The government remains confident in meeting its 3.2% growth target for 2024, with the new USD 1.3 bln Chancay port expected to support growth in 2025.
Following the recent interest rate cut, Peru’s central bank forecasts activity near potential and inflation around the target. While inflation expectations are decelerating, the central bank may continue easing until rates reach 4%, aligning with the neutral real rate of 2%. Lower growth expectations and weaker US interest rates support this outlook.
Peru’s central bank cut its key interest rate to 4.75% as inflation slowed to 1.97% in December, well below the 2% target. This reduction aims to support the country’s economic recovery as inflation continues to ease.
Peru’s central bank kept the benchmark interest rate at 5.0% in December, following a 275 bps reduction over the previous 15 months. Inflation, both overall and core, rose slightly but remains within the target range of 2%±1%. Authorities expect inflation to stay within the target range, though another 25bps rate cut is anticipated in Q1 2025.
Peru aims to strengthen its export market in 2025 by securing new FTAs globally, focusing on Indonesia, where negotiations are nearing completion. The government expects the agreement to be finalized by mid-2025, with Indonesia’s President Subianto pushing for a resolution on pending issues. Additionally, Peru is exploring agreements with the Philippines, with a meeting scheduled for early 2025.
Peru’s central bank Deputy Governor, Oliva, stated that meeting the fiscal deficit target of 2.2% of GDP in 2025 would be ‘super difficult,’ citing pre-electoral spending pressures. While tax revenues may rise, and the deficit could fall below 4% of GDP in 2024, Oliva expressed concerns about breaching the fiscal rule framework in 2025 due to persistent fiscal imbalances.
Peru’s central bank is expected to keep the monetary policy rate at 5% instead of the previously predicted 4.5% for 2024. Annual inflation increased from 2.01% in October to 2.27% in November, with a monthly rate of 0.09%, surpassing market expectations. The central bank is expected to maintain the 5% rate in its next meeting on December 12, with the CPI now forecast to rise between 2.3% and 2.4% for the year, according to analysts from Scotiabank.
Peru’s economy grew 1.2% QoQ in 1H24, but growth slowed to 0.7% in Q3. Lower government spending and slower household consumption and exports were the main contributors. Despite this, investment remained strong, and growth is expected to pick up in 2025, supported by decelerating inflation, lower interest rates, and public sector investment plans. Risks include weak China growth and political instability.
Peru’s inflation rate is expected to rise to 2.4% in November, up from 2.0% in October, slightly above the central bank’s forecast but within the target range, according to Bloomberg analysts. Non-core inflation is driven by higher food and beverage prices, though energy prices have dropped. Excluding food and energy, inflation is seen rising to 2.6%.
Peru’s economy is recovering well, with the IMF praising the country’s efforts to manage inflation and growth despite external challenges. Inflation dropped from 8% in 2022 to 2% in October 2024, and the economy grew 3.2% in September 2024, driven by mining, hydrocarbons, agriculture, and construction. The government forecasts 3.2% growth for 2024, marking a strong rebound from a 0.6% contraction in 2023.
The APEC summit in Lima concluded with key decisions reflecting the region’s growing importance amid global geopolitical shifts. Tensions between the US and China were evident, with Chinese President Xi’s visit marking deepening Sino-Peruvian cooperation. Xi highlighted the strategic Chancay port as a vital link between Peru and Shanghai, boosting trade between Asia and Latin America. Peru also signed a Free Trade Agreement with Hong Kong to expand exports.
Peru’s central bank’s recent survey showed stable growth, inflation, and exchange rate forecasts. Real GDP growth projections for 2024 increased slightly from 2.8%-3.0% to 2.9%-3.0%, while 2025 projections remained unchanged at 2.8%-3.0%. 12-month inflation expectations remained steady at 2.45%, slightly up from 2.43% the previous month, in line with the 3-month moving average.
Peru and China are set to sign an updated free-trade agreement to increase bilateral trade by at least 50%, according to Peru’s foreign affairs minister. The agreement will be signed during Chinese President Xi Jinping’s upcoming visit to Peru.
Indonesian President Subianto is scheduled to meet with Chinese President Jinping on Friday before traveling to the US for a potential meeting with President-elect Trump. This trip marks his first overseas visit since his inauguration on October 20, which includes stops at the APEC summit in Peru, the G20 meeting in Brazil, and an official visit to the UK.
Peru’s central bank cut interest rates by 25 bps to 5.0% on Thursday after core inflation fell for the fourth consecutive month. The central bank noted that the real interest rate is nearing the estimated neutral level, which neither stimulates nor cools the economy. While inflation is expected to remain within the target band, a slight increase may occur in the coming months due to base effects.
Fitch reaffirmed Peru’s BBB investment-grade rating, which improved the country’s outlook to stable from negative. This follows Moody’s similar outlook adjustment in September, reflecting optimism around political reforms. S&P still rates Peru at the lowest investment grade after an April downgrade.
Peru’s inflation rose by 2.01% YoY in October, aligning near the central bank’s target range of 1%-3%. Under President Julio Velarde, Peru maintains the lowest inflation rate among major Latin American economies, with year-end inflation projected at approximately 2.2%.
Peru’s Congress voted on Wednesday against a motion that proposed firing Finance Minister Jose Arista. Arista has been in the role since Feb. and is currently leading budget negotiations between the executive and legislative branches, disregarding all potential claims against Arista.
Peru’s GDP grew by 3.53% YoY in August 2024, slowing from July’s 4.47% increase but still reflecting solid overall performance. Mining output led the growth at 8.87%, while the agricultural sector saw a moderated decline, with output down by 2.29%, compared to a 3.93% drop in July.
Peru’s central bank held its monetary policy rate steady at 5.25% after two recent cuts. Despite inflation easing below the target in September to 1.8%, core inflation and 12-month inflation expectations remain above 2%, prompting caution. The bank foresees a slight, temporary rise in the inflation index in Q4 due to base effects while remaining within the target range of 2% ± 1%.
Peru’s Fiscal Council expressed concerns over recent fiscal policies, which it believes have contributed to a significant deterioration in its fiscal strength. The Council noted that rising public deficits have breached budgetary rules for the second consecutive year, raising doubts about the credibility and sustainability of fiscal policy over the medium to long term.
Peru’s consumer prices fell by 0.24% MoM in September, significantly below the expected 0.08% rise. Annual inflation decreased to 1.8% in September, down from 2.0% in August, with core inflation at 2.6% YoY. This decline reinforces the central bank’s (BCRP) view of lower inflation persistence, as noted by Deutsche Bank.
Moody’s affirmed Peru’s investment-grade rating at Baa1 and improved its outlook to stable from negative. The agency highlighted that political reforms in Peru mitigate medium-term risks related to institutional stability, which could otherwise impact governability. Peru’s central bank remains optimistic about the economy, projecting growth of 3.1% for 2024 and 3.0% for 2025, following a contraction of 0.6% last year.
Brazilian markets experienced a rally following the central bank’s decision to increase interest rates by 25 bps, coming just after the Fed rate cut. Despite annual inflation easing to 4.24% in August, there remains significant pressure on the central bank to continue rate hikes, setting Brazil apart from other regional economies like Chile, Peru, Mexico, and Colombia, which are reducing rates to support growth.
