Peru's Robust Short-Term Growth to Slow In Coming Years As Policy Uncertainty Limits Investment

• Fitch is expecting that a rebound in private consumption and investment in Peru will underpin a 10.2% real GDP growth in 2021 and 4.7% growth in 2022. In Q2 2021, real GDP grew 41.9% y-o-y and 6.5% q-o-q, with the Q2 results outlining a broad H121 recovery in private consumption (14.0%), public consumption (19.5%), fixed capital formation (82.3%), and exports (17.5%), though imports also rose 20.7% in the first half of the year.
• As Peru's national vaccination campaign progresses, it will allow for greater economic activity and fewer public health restrictions, underpinning Fitch’s expectation for a broad economic recovery in the short-to-medium term, especially as Peru's national vaccination campaign progresses. As of August 21, 29.2% of Peruvians had received at least one COVID-19 vaccine dose and 22.5% had been fully vaccinated.
• While the agency’s growth forecasts imply that Peru will fully recover from the pandemic in 2022, less favourable government policies and tighter monetary policy will cause growth to decelerate in the medium-to-long term, averaging 3.2% from 2023 to 2025.
• In addition, downside risks to the short- and long-term forecasts include the spread of COVID-19 variants in Peru and globally, in addition to elevated concerns over policy direction under leftist President Pedro Castillo.

(Source: Fitch Solutions)