Peru Economic Outlook. March 2025

Summary

The Peruvian economy will grow 3.1% in 2025, 0.4 percentage points more than forecast in December. This change primarily reflects higher expected growth in the US and China and earlier and increased investment flows into some mining and infrastructure projects. Growth is projected to remain at 2.7% for 2026.

Key points

• Key points:
• Global growth will slow amid increased uncertainty and protectionism. Although the latest readings support upward revisions for the US and China, both will continue to slow. US inflation will rise, partly due to tariffs. The Fed is expected to keep rates unchanged in the short term, but could reduce them in the second half of 2025.
• The fiscal deficit began to decline in 4Q24 and closed the year at 3.5% of GDP, exceeding the fiscal rule (2.8%). In 2025, the deficit will fall to 2.4%, due to improved revenues. In the medium term, we expect the deficit to be close to 2.0%, with gross public debt reaching a level of around 36.0% of GDP in 2030.
• The PEN appreciated despite the US's initiation of the trade war. This strength is due to cyclical factors (such as foreign investors closing long positions in USD) and structural factors (high export prices). However, defensive positions will likely begin to be taken closer to the start of the electoral process, with the PEN closing 2025 at a level between 3.65 and 3.75 soles per dollar. In 2026, after the elections and with the Fed lowering its rate, the PEN will appreciate, closing that year between 3.60 and 3.70 soles per dollar.
• Anchored inflation expectations, normal weather conditions and economic growth with limited demand pressures are consistent with inflation remaining subdued going forward. We estimate inflation will reach 2.5% this year and 2.6% next year.
• With the benchmark interest rate currently at 4.75%, the Central Bank is close to completing its monetary normalization cycle. We anticipate a further 25bp cut soon, bringing the policy rate to 4.50%, a level we consider neutral.

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