{ "title": "Peru: Staff Concluding Statement of the 2022 Article IV Mission", "publication": "IMF News, March 7, 2022", "sourceUrl": "https://www.imf.org/en/news/articles/2022/03/07/mcs030722-peru-staff-concluding-statement-of-the-2022-article-iv-mission", "canonical": "https://www.imf.org/en/news/articles/2022/03/07/mcs030722-peru-staff-concluding-statement-of-the-2022-article-iv-mission", "overlayPath": "/en/news/articles/2022/03/07/mcs030722-peru-staff-concluding-statement-of-the-2022-article-iv-mission/index.md", "summary": "The economic recovery has been strong, but the outlook is confronted with downward external and domestic risks.", "publishDate": "2022-03-07", "sections": [ { "heading": "Mission overview and key judgment", "content": "- The economic recovery has been strong, but the outlook is confronted with downward external and domestic risks.\n- Monetary policy needs to respond rapidly to inflationary pressures and the tightening of global financial conditions.\n- A neutral fiscal stance is appropriate considering the negative output gap and risks to growth.\n- Realigning the fiscal framework, consistent with a gradual fiscal consolidation, will help preserve confidence.\n- Structural reforms are necessary to enhance the effectiveness of public services, promote the development of the private sector, and prevent potential growth from declining." }, { "heading": "Recovery from the pandemic and near-term outlook", "content": "- Real GDP rose by 13.3 percent in 2021, exceeding its pre-pandemic level in 21Q3.\n- Formal employment fully recovered in 2021, but labor force participation and total employment haven’t fully recovered to pre-pandemic trends.\n- Peru recorded one of the highest death rates globally during the pandemic and remains burdened by high social and economic costs.\n- Growth is expected to slow to 3 percent in 2022 as external conditions tighten and policy stimulus is withdrawn.\n- Main downside risks: the pandemic, a sharp tightening of global financial conditions, extended global supply chain disruptions, geopolitical tensions, an abrupt slowdown in China, and continued political uncertainty." }, { "heading": "Policy buffers, reserves, and IMF arrangements", "content": "- Fiscal deficit fell to 2.6 percent of GDP (2021) on the back of higher metal prices, soaring tax revenues, collection of tax arrears, and winding down of 2020 stimulus measures.\n- Public debt as a percentage of GDP is expected to decline in 2022.\n- International reserves rose to US$78.5 billion (35 percent of GDP) in 2021.\n- Peru has access to a Flexible Credit Line arrangement with the IMF in the amount of US$11 billion." }, { "heading": "Inflation, exchange rate, and monetary policy", "content": "- Headline inflation began rising early in the summer of 2021, rapidly exceeding the target range, and extended to core inflation and inflation expectations.\n- The Banco Central de Reserva del Perú (BCRP) started tightening monetary policy in August 2021 and has steadily raised the policy rate since reaching 3.5 percent in February.\n- Although inflationary pressures are less acute than elsewhere in the region, the monetary stance remains slightly expansionary and further tightening is warranted.\n- Short-term: foreign exchange intervention may be warranted to alleviate pressures from dollarization and currency mismatch.\n- Medium-term: as dollarization declines, the exchange rate should play a larger role as a shock absorber and frequent FX intervention will weaken." }, { "heading": "Fiscal stance and framework realignment", "content": "- The fiscal deficit would stand at about 2.7 percent of GDP in 2022, reflecting a prudent budget with increased spending in health, education, and social protection.\n- Public debt is sustainable and Peru has some fiscal space; contingency plans should be prepared to contain slippages.\n- Upside surprises should be used to rebuild fiscal buffers.\n- Use of emergency procedures to appropriate budget resources should be phased out as Covid-related support subsides.\n- Authorities intend to realign fiscal rules with a gradual consolidation path in the revised Medium-Term Macroeconomic Framework.\n- Based on current spending plans, a fiscal consolidation of 0.6 percent of GDP per year in 2023-2025 would be necessary to attain the authorities’ targets with a limited impact on growth.\n- Medium-term priorities: revenue mobilization, expenditure rationalization, enhanced tax collection, tax policy adjustments, a medium-term spending strategy, enhanced targeting of social benefits, and a comprehensive civil service reform." }, { "heading": "Financial sector resilience and supervision", "content": "- Broad policy support during the pandemic maintained the flow of credit; voluntary provisioning by banks and targeted follow-up programs minimized the impact of a slight rise in nonperforming loans.\n- Bank profitability, although below pre-pandemic levels, has increased, helping institutions—particularly smaller ones—to cover provisioning requirements.\n- Stress tests indicate the financial system at large is resilient even under a severely adverse scenario.\n- Normalization of prudential measures has begun without significant impact on the financial system.\n- Further progress required in financial sector oversight, including strengthening legal protection of supervisory agency staff, which will require political consensus." }, { "heading": "Structural reforms to boost potential growth and inclusion", "content": "- Revamp the structural reform agenda to reduce scarring from the pandemic and tackle fragilities exposed by the crisis.\n- Continue addressing gaps in health, education, and social protection; improve effectiveness of public services and enhance transparency.\n- A comprehensive civil service reform is essential; recent law approved is a step forward but requires steadfast implementation.\n- Strengthen anti-corruption enforcement and increase effectiveness of anti-corruption institutions.\n- Improve capacity to execute public investment to reduce the infrastructure gap, including digital infrastructure.\n- Create a stable and predictable legal and regulatory environment to nurture confidence and private investment.\n- Policies to increase productivity and reduce informality should focus on reducing rigidities and high compliance costs, improving the business climate, enhancing financial inclusion, and narrowing the gender gap.\n- Pension reform is urgently needed to reduce old-age poverty risks; withdrawals from private pension funds in 2020-21 have heightened challenges of low coverage and adequacy. Any solution will likely require a broader contribution base and higher contribution rates." }, { "heading": "Selected economic indicators and projections (exact figures as presented)", "content": "- Social indicators:\n - Poverty rate (total) 1/: 2019 20.6; 2020 32.6; 2021 29.8; 2022 …\n - Unemployment rate (in percent; period average): 2019 6.6; 2020 13.9; 2021 10.9\n- Production and prices (Annual percentage change, unless otherwise indicated):\n - Real GDP: 2019 2.2; 2020 -11.0; 2021 13.3; 2022 3.0\n - Output gap (percent of potential GDP): 2019 -1.6; 2020 -7.3; 2021 -0.4; 2022 -0.3; 2023 0.0\n - Consumer prices (end of period): 2019 1.9; 2020 2.0; 2021 6.4; 2022 2.3\n- External sector:\n - Exports: 2019 -2.2; 2020 -10.6; 2021 47.1; 2022 10.7; 2023 3.1; 2024 3.4\n - Imports: 2019 -1.8; 2020 -15.6; 2021 39.3; 2022 11.2; 2023 4.8; 2024 5.0; 2025 5.2\n - External current account balance (% of GDP): 2019 -1.0; 2020 0.8; 2021 -2.8; 2022 -1.4; 2023 -1.5\n - Gross reserves (In billions of U.S. dollars): 2019 68.4; 2020 74.9; 2021 78.5; 2022 78.4; 2023 78.3; 2024 77.5; 2025 76.5\n - Percent of short-term external debt 5/: 2019 428; 2020 487; 2021 586; 2022 563; 2023 540; 2024 555; 2025 491\n- Money and credit 2/ 3/:\n - Broad money: 2019 8.8; 2020 29.0; 2021 2.6; 2022 7.6; 2023 5.6; 2024 6.2\n - Net credit to the private sector: 2019 14.0; 2020 6.3; 2021 7.0; 2022 6.5; 2023 7.1; 2024 7.5\n- Public sector (In percent of GDP; unless otherwise indicated):\n - NFPS revenue: 2019 24.8; 2020 22.0; 2021 25.6; 2022 24.1; 2023 24.2\n - NFPS primary expenditure: 2019 25.0; 2020 29.2; 2021 26.6; 2022 25.3; 2023 24.9; 2024 24.3; 2025 23.8\n - NFPS primary balance: 2019 -0.2; 2020 -1.2; 2021 -0.8; 2022 -0.1; 2023 0.4\n - NFPS overall balance: 2019 -8.9; 2020 -2.6; 2021 -2.7; 2022 -2.1\n- Debt:\n - Total external debt 4/: 2019 34.7; 2020 43.3; 2021 46.1; 2022 44.5; 2023 42.0; 2024 39.9; 2025 37.7\n - NFPS gross debt 5/: 2019 27.1; 2020 35.1; 2021 35.9; 2022 34.8; 2023 35.4; 2024 35.2; 2025 34.9\n - External: 2019 8.5; 2020 14.9; 2021 19.6; 2022 20.4; 2023 19.8; 2024 18.9; 2025 18.4\n - Domestic: 2019 18.6; 2020 20.2; 2021 16.3; 2022 14.4; 2023 15.6; 2024 16.2; 2025 16.5\n- Savings and investment:\n - Gross domestic investment: 2019 21.0; 2020 19.3; 2021 21.3; 2022 24.7\n - National savings: 2019 20.0; 2020 23.6; 2021 23.5; 2022 23.3; 2023 23.2\n- Memorandum items:\n - Nominal GDP (S/. billions): 2019 771; 2020 717; 2021 872; 2022 952; 2023 1,001; 2024 1,049; 2025 1,099\n - GDP per capita (in US$): 2019 6,963; 2020 6,127; 2021 6,643; 2022 6,888; 2023 7,116; 2024 7,323; 2025 7,569\n\nIMF staff concluding statement, March 7, 2022.\n\n---\n\n\n References\n\n- IMF COVID-19 Hub\n- Policy Tracker\n- Financial Assistance\n- Questions & Answers\n- Peru and the IMF\n- IMF Policy Advice -- A Factsheet\n- Mission Concluding Statements\n- PRESS CENTER\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2022/03/07/mcs030722-peru-staff-concluding-statement-of-the-2022-article-iv-mission" } ], "bullets": [ "[Markdown version](/en/news/articles/2022/03/07/mcs030722-peru-staff-concluding-statement-of-the-2022-article-iv-mission/index.md)", "[Structured JSON version](/en/news/articles/2022/03/07/mcs030722-peru-staff-concluding-statement-of-the-2022-article-iv-mission/index.json)", "[Bundle manifest](/en/news/articles/2022/03/07/mcs030722-peru-staff-concluding-statement-of-the-2022-article-iv-mission/bundle-manifest.json)", "Published: March 7, 2022", "The economic recovery has been strong, but the outlook is confronted with downward external and domestic risks.", "Monetary policy needs to respond rapidly to inflationary pressures and the tightening of global financial conditions.", "A neutral fiscal stance is appropriate considering the negative output gap and risks to growth.", "Realigning the fiscal framework, consistent with a gradual fiscal consolidation, will help preserve confidence.", "Structural reforms are necessary to enhance the effectiveness of public services, promote the development of the private sector, and prevent potential growth from declining.", "Real GDP rose by 13.3 percent in 2021, exceeding its pre-pandemic level in 21Q3.", "Formal employment fully recovered in 2021, but labor force participation and total employment haven’t fully recovered to pre-pandemic trends.", "Peru recorded one of the highest death rates globally during the pandemic and remains burdened by high social and economic costs.", "Growth is expected to slow to 3 percent in 2022 as external conditions tighten and policy stimulus is withdrawn.", "Main downside risks: the pandemic, a sharp tightening of global financial conditions, extended global supply chain disruptions, geopolitical tensions, an abrupt slowdown in China, and continued political uncertainty.", "Fiscal deficit fell to 2.6 percent of GDP (2021) on the back of higher metal prices, soaring tax revenues, collection of tax arrears, and winding down of 2020 stimulus measures.", "Public debt as a percentage of GDP is expected to decline in 2022.", "International reserves rose to US$78.5 billion (35 percent of GDP) in 2021.", "Peru has access to a Flexible Credit Line arrangement with the IMF in the amount of US$11 billion.", "Headline inflation began rising early in the summer of 2021, rapidly exceeding the target range, and extended to core inflation and inflation expectations.", "The Banco Central de Reserva del Perú (BCRP) started tightening monetary policy in August 2021 and has steadily raised the policy rate since reaching 3.5 percent in February.", "Although inflationary pressures are less acute than elsewhere in the region, the monetary stance remains slightly expansionary and further tightening is warranted.", "Short-term: foreign exchange intervention may be warranted to alleviate pressures from dollarization and currency mismatch.", "Medium-term: as dollarization declines, the exchange rate should play a larger role as a shock absorber and frequent FX intervention will weaken.", "The fiscal deficit would stand at about 2.7 percent of GDP in 2022, reflecting a prudent budget with increased spending in health, education, and social protection.", "Public debt is sustainable and Peru has some fiscal space; contingency plans should be prepared to contain slippages.", "Upside surprises should be used to rebuild fiscal buffers.", "Use of emergency procedures to appropriate budget resources should be phased out as Covid-related support subsides.", "Authorities intend to realign fiscal rules with a gradual consolidation path in the revised Medium-Term Macroeconomic Framework.", "Based on current spending plans, a fiscal consolidation of 0.6 percent of GDP per year in 2023-2025 would be necessary to attain the authorities’ targets with a limited impact on growth.", "Medium-term priorities: revenue mobilization, expenditure rationalization, enhanced tax collection, tax policy adjustments, a medium-term spending strategy, enhanced targeting of social benefits, and a comprehensive civil service reform.", "Broad policy support during the pandemic maintained the flow of credit; voluntary provisioning by banks and targeted follow-up programs minimized the impact of a slight rise in nonperforming loans.", "Bank profitability, although below pre-pandemic levels, has increased, helping institutions—particularly smaller ones—to cover provisioning requirements.", "Stress tests indicate the financial system at large is resilient even under a severely adverse scenario.", "Normalization of prudential measures has begun without significant impact on the financial system.", "Further progress required in financial sector oversight, including strengthening legal protection of supervisory agency staff, which will require political consensus.", "Revamp the structural reform agenda to reduce scarring from the pandemic and tackle fragilities exposed by the crisis.", "Continue addressing gaps in health, education, and social protection; improve effectiveness of public services and enhance transparency.", "A comprehensive civil service reform is essential; recent law approved is a step forward but requires steadfast implementation.", "Strengthen anti-corruption enforcement and increase effectiveness of anti-corruption institutions.", "Improve capacity to execute public investment to reduce the infrastructure gap, including digital infrastructure.", "Create a stable and predictable legal and regulatory environment to nurture confidence and private investment.", "Policies to increase productivity and reduce informality should focus on reducing rigidities and high compliance costs, improving the business climate, enhancing financial inclusion, and narrowing the gender gap.", "Pension reform is urgently needed to reduce old-age poverty risks; withdrawals from private pension funds in 2020-21 have heightened challenges of low coverage and adequacy. Any solution will likely require a broader contribution base and higher contribution rates.", "Social indicators:", "Production and prices (Annual percentage change, unless otherwise indicated):", "External sector:", "Money and credit 2/ 3/:", "Public sector (In percent of GDP; unless otherwise indicated):", "Debt:", "Savings and investment:", "Memorandum items:", "[IMF COVID-19 Hub](https://www.imf.org/en/Topics/imf-and-covid19)", "[Policy Tracker](https://www.imf.org/en/Topics/imf-and-covid19/Policy-Responses-to-COVID-19)", "[Financial Assistance](https://www.imf.org/en/Topics/imf-and-covid19/COVID-Lending-Tracker)", "[Questions & Answers](https://www.imf.org/en/About/FAQ/imf-response-to-covid-19)", "[Peru and the IMF](http://www.imf.org/external/country/PER/index.htm)", "[IMF Policy Advice -- A Factsheet](https://www.imf.org/en/about/factsheets/imf-surveillance)", "[Mission Concluding Statements](https://www.imf.org/en/news/searchnews)", "[PRESS CENTER](http://presscenter.imf.org/)", "[https://www.imf.org/en/home](https://www.imf.org/en/home)" ], "alternates": { "markdown": "/en/news/articles/2022/03/07/mcs030722-peru-staff-concluding-statement-of-the-2022-article-iv-mission/index.md", "json": "/en/news/articles/2022/03/07/mcs030722-peru-staff-concluding-statement-of-the-2022-article-iv-mission/index.json", "bundleManifest": "/en/news/articles/2022/03/07/mcs030722-peru-staff-concluding-statement-of-the-2022-article-iv-mission/bundle-manifest.json" }, "generatedAtUtc": "2026-09-26T01:01:59.420Z" }