IMF Executive Board Concludes 2025 Article IV Consultation with Peru

IMF News, June 10, 2025

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Growth recovered from consecutive natural disaster shocks and social turmoil; growth is expected to moderate to 2.8 percent in 2025 and thereafter remain close to potential.
Inflation is expected to remain within the target band of 1-3 percent; inflation expectations are approaching 2 percent.
The current account balance is envisaged to remain in a surplus of 1.7 percent of GDP in 2025, and to gradually return to a deficit in the medium term—stabilizing at about 1.5 percent of GDP.
Headline macro buffers: very strong buffers including low public debt, abundant international reserves, and access to international capital markets on favorable terms.

Risks are tilted to the downside given elevated external uncertainty, with dominant external risks including:
- prolonged trade policy uncertainty,
- financial market volatility,
- tighter global financial conditions,
- commodity price volatility.
Key domestic risks include:
- intensification of political uncertainty and pre-election tensions,
- social unrest over security concerns,
- weather-related shocks.
Despite risks, Peru has ample buffers to cope with shocks.

A broadly neutral monetary policy stance is appropriate given a closed output gap and anchored inflation expectations.
Monetary policy should remain data dependent in light of heightened external uncertainty.
Continued exchange rate flexibility should be allowed to help cushion external shocks.

The 2025 budget envisages a deficit of 2.2 percent of GDP, consistent with the revised fiscal rule target.
A tax revenue rebound and one-off factors will help reduce the deficit in 2025, but additional efforts of about 0.4 percent of GDP will be needed to secure fiscal rule compliance in 2025.
Medium-term fiscal targets:
- Fiscal rule deficit target of 1 percent of GDP by 2028.
- Debt ceiling of 30 percent of GDP by 2035.
Authorities’ medium-term consolidation plan envisages a reduction of current spending by about 0.4 percent of GDP per year between 2026 and 2028.
Policy recommendations to achieve balanced consolidation:
- Identify both revenue and spending measures, including streamlining tax expenditures and strengthening tax administration.
- Control wages, discretionary transfers, and inefficient public investment.
- Avoid legislative initiatives bearing fiscal costs, proposals that erode the tax base, and excessive reliance on private participation schemes.
- Reform Petroperú to significantly reduce costs and enhance transparency and governance.

The financial sector is sound and profitable; banks have ample liquidity and capital buffers.
Non-performing loans (NPLs) are elevated for small- and medium-sized firms but are expected to continue improving.
Macroprudential priorities:
- Continue vigilance on pockets of vulnerability, particularly corporate loans.
- Focused macroprudential policies to reduce vulnerabilities from remaining dollarized credit.
- Authorities’ regulation to introduce higher risk weighting in 2026 will help alleviate vulnerabilities from unhedged dollar credit.
- Consider introducing currency-specific NSFR requirements to complement existing currency-specific LCR limits.
Regulatory and market development priorities:
- Maintain prohibition of future pension withdrawals to protect domestic capital market functioning.
- Broaden investor base through retail investment products to attract funds back into the securities market.
- Complete activation criteria improvements for the countercyclical capital buffer (CCyB), finalize revised Basel III risk-weight framework, evaluate recovery plans for domestic systemically important banks, and expand resolution planning to financial group level.

Urgent structural reforms are required to lift potential growth, including:
- Updating the fiscal decentralization framework and redesigning natural resource revenue-sharing formulas to boost public spending efficiency and channel mining dividends into development.
- Curbing rising insecurity, reforming labor and tax regulations that impose excessive costs for formalizing or growing a business, enhancing independence and integrity of judicial bodies, and strengthening tools to combat corruption impunity.
- Building resilience to natural disasters.
- Embracing opportunities from digital technologies and artificial intelligence.
Mining investment pipeline and constraints:
- A US$64 billion pipeline of mining investment projects has been mostly stalled for many years due to bureaucratic complexity and social conflicts.
- Unlocking these projects and channeling additional fiscal revenues could permanently boost potential growth.
The OECD accession process provides a clear roadmap for critical reforms to boost the business climate, reduce informality, and reform the civil service.

Growth: Real GDP growth projected 2.8 percent in 2025.
Inflation: Target band 1-3 percent; inflation expectations approaching 2 percent.
Current account: Surplus of 1.7 percent of GDP in 2025.
2025 budget deficit: 2.2 percent of GDP.
Additional fiscal effort needed in 2025: about 0.4 percent of GDP.
Medium-term fiscal rule target: 1 percent of GDP by 2028.
Debt ceiling: 30 percent of GDP by 2035.
Mining investment pipeline: US$64 billion.
Gross reserves: 79.2 (2024), projected 84.2 (2025), 88.7 (2026), 92.7 (2027), 96.4 (2028), 100.4 (2029), 104.9 (2030) (billions of U.S. dollars).
Gross non-financial public sector debt: 32.8 (2024), projected 33.7 (2025), 34.7 (2026), 35.5 (2027), 35.9 (2028), 36 (2029) (percent of GDP).
NFPS overall balance: -3.5 (2024), projected -2.6 (2025), -2.2 (2026), -2 (2027) (percent of GDP).
NFPS revenue: 22.7 (2024), projected 23.6 (2025), 23.1 (2026), 23.2 (2027), 23.3 (2028), 23.4 (2029) (percent of GDP).
Nominal GDP (S/. billion): 1,085 (2024), 1,136 (2025), 1,188 (2026), 1,242 (2027), 1,299 (2028), 1,360 (2029), 1,423 (2030).
GDP per capita (in US$): 8,485 (2024), projected 8,814 (2025), 9,182 (2026), 9,505 (2027), 9,825 (2028), 10,168 (2029), 10,529 (2030).

Source: IMF Executive Board Concludes 2025 Article IV Consultation with Peru (June 10, 2025).