IMF Executive Board Concludes 2022 Article IV Consultation with Peru
IMF News, May 2, 2022
Source details
- Canonical URL
- IMF Executive Board Concludes 2022 Article IV Consultation with Peru
Other formats
Bibliographic details
- Published: May 2, 2022
Economic activity and pandemic impact
- Real GDP rose 13.3 percent in 2021, rebounding strongly from a deep downturn in 2020.
- Real GDP surpassed its pre-pandemic level but remains below its pre-pandemic trend.
- Labor force participation and total employment haven’t fully recovered.
- Poverty increased significantly in 2020 and is still above pre-pandemic levels despite some improvement in 2021.
- Progress in the vaccination campaign allowed a gradual lifting of Covid-19 mobility restrictions.
- Volatility in financial markets has increased amid heightened political uncertainty.
Outlook and risks
- Growth projection: 3.0 percent in 2022 as external conditions tighten and policy stimulus is withdrawn.
- Balance of risks is tilted to the downside.
- External risks identified:
- Ongoing geopolitical tensions.
- A sharp tightening of global financial conditions.
- Extended global supply chain disruptions.
- An abrupt growth slowdown in China, Peru’s main trade partner.
- Domestic risks identified:
- New Covid outbreaks that could prompt reintroduction of containment measures.
- Political uncertainty and social unrest that could weigh on private investment.
- Inflationary pressures could be more persistent, requiring faster tightening of monetary policy.
- Positive scenario: More rapid progress on containing the pandemic, both globally and domestically, and reduced political uncertainty could result in positive surprises.
Policy assessment and recommendations (Executive Board)
- General assessment:
- Directors commended the Peruvian authorities for a decisive macroeconomic policy response in 2020 and strong policy frameworks and buffers.
- Directors noted the macroeconomic outlook remains uncertain with elevated external and domestic risks.
- Policy mix should balance responding to rising inflation and managing downside risks to growth, considering ongoing impacts on employment and poverty.
- Importance of maintaining and further strengthening policy institutional frameworks was underscored.
- Fiscal policy:
- Fiscal policy should remain broadly neutral in the short term.
- A gradual consolidation is necessary, encompassing revenue mobilization and expenditure rationalization, including pension reforms, to address emerging spending needs while preserving fiscal sustainability.
- Directors welcomed steps to clarify policy intentions by aligning the fiscal rules and the medium-term budgeting framework, and commitment to strengthen the Fiscal Council with IMF technical assistance.
- Monetary policy and exchange rate intervention:
- Further tightening of monetary policy is warranted to bring inflation and inflation expectations back to the target range and help adjust to tighter global financial conditions.
- Foreign exchange intervention is warranted to contain excess volatility, but reducing its frequency would facilitate market development and de-dollarization.
- Financial sector policy:
- Directors supported the gradual unwinding of pandemic-era prudential policies in a context of limited financial system vulnerabilities.
- Closing remaining regulatory and supervisory gaps and further enhancing systemic risk assessment are important to strengthen financial resilience.
- Exploring the introduction of a central-bank digital currency will require a thorough assessment of risks and costs.
- Structural reforms:
- A renewed structural reform agenda in the context of the OECD accession process is critical to mitigate scarring from the pandemic and support a green and inclusive recovery.
- Priorities include addressing informality in the labor market (especially among women); more effective public services and greater transparency through civil service reform and anti-corruption measures; and providing a stable and predictable legal and regulatory environment.
- Steps are needed to reduce risks from climate change, ease the transition to a low-emission economy, and contribute to global mitigation efforts.
Key statistics and projections (selected)
- Social indicators:
- Poverty rate (total): 2019 = 20.2; 2020 = 30.1; 2021 = 22.1.
- Unemployment rate (in percent; average): 2019 = 6.6; 2020 = 13.9; 2021 = 10.9.
- Production and prices (annual percentage change unless otherwise indicated):
- Real GDP: 2019 = 2.2; 2020 = -11.0; 2021 = 13.3; 2022 = 3.0.
- Output gap (percent of potential GDP): 2019 = -1.6; 2020 = -7.3; 2021 = -0.4; 2022 = -0.3; 2023 = 0.0.
- Consumer prices (end of period): 2019 = 1.9; 2020 = 2.0; 2021 = 6.4; 2022 = 4.0; 2023 = 2.3.
- External sector:
- Exports (annual percentage change): 2019 = -2.2; 2020 = -10.6; 2021 = 47.1; 2022 = 16.1; 2023 = 3.4; 2024 = 2.8.
- Imports (annual percentage change): 2019 = -1.8; 2020 = -15.6; 2021 = 39.3; 2022 = 17.9; 2023 = 4.7; 2024 = 4.8.
- External current account balance (% of GDP): 2019 = -1.0; 2020 = 0.8; 2021 = -2.8; 2022 = -1.5; 2023 = -1.4.
- Gross reserves (In billions of U.S. dollars): 2019 = 68.4; 2020 = 74.9; 2021 = 78.5; 2022 = 78.2; 2023 = 77.9; 2024 = 78.9.
- Gross reserves (Percent of short-term external debt 5/): 2019 = 428; 2020 = 487; 2021 = 586; 2022 = 561; 2023 = 537; 2024 = 565.
- Money and credit (depository corporations):
- Broad money: 2019 = 8.8; 2020 = 29.0; 2021 = 2.6; 2022 = 8.4.
- Net credit to the private sector: 2019 = 14.0; 2020 = 6.3; 2021 = 8.7; 2022 = 7.8; 2023 = 5.6.
- Public sector (In percent of GDP unless otherwise indicated):
- NFPS revenue: 2019 = 24.8; 2020 = 22.0; 2021 = 25.6; 2022 = 24.4; 2023 = 24.3.
- NFPS primary expenditure: 2019 = 25.0; 2020 = 29.2; 2021 = 26.6; 2022 = 25.5; 2023 = 25.1; 2024 = 24.5.
- NFPS primary balance: 2019 = -0.2; 2020 = -0.8.
- NFPS overall balance: 2019 = -8.9; 2020 = -2.6; 2021 = -2.1.
- Debt:
- Total external debt 4/ (percent of GDP): 2019 = 34.7; 2020 = 43.3; 2021 = 46.1; 2022 = 43.5; 2023 = 40.0; 2024 = 37.8.
- NFPS gross debt 5/ (percent of GDP): 2019 = 27.1; 2020 = 35.1; 2021 = 35.9; 2022 = 34.4.
- External (percent of GDP): 2019 = 8.5; 2020 = 14.9; 2021 = 19.6; 2022 = 19.4; 2023 = 18.5.
- Domestic (percent of GDP): 2019 = 18.6; 2020 = 16.3; 2021 = 14.2; 2022 = 15.3; 2023 = 15.9.
- Savings and investment:
- Gross domestic investment: 2019 = 21.0; 2020 = 19.3; 2021 = 21.3; 2022 = 24.7.
- National savings: 2019 = 20.0; 2020 = 23.6; 2021 = 23.3; 2022 = 23.0.
- Memorandum items:
- Nominal GDP (S/. billions): 2019 = 771; 2020 = 717; 2021 = 872; 2022 = 958; 2023 = 1,018; 2024 = 1,070.
- GDP per capita (in US$): 2019 = 6,963; 2020 = 6,127; 2021 = 6,643; 2022 = 7,034; 2023 = 7,475; 2024 = 7,748.
IMF Executive Board Concludes 2022 Article IV Consultation with Peru — Press Release No. 22/138 (May 2, 2022).