Building Macroeconomic Resilience to Natural Disasters and Persistent Temperature Changes: The Case of Peru

IMF Working Papers, July 25, 2025

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Peru is highly exposed to periodic El Niño Costero events that impair production in the fishing, agriculture, and construction sectors and inflict sizeable damages to physical assets.
Rising average temperatures are expected to diminish productivity in agriculture, fisheries, and energy.
Without efforts to strengthen adaptive capacity, Peru remains highly vulnerable to acute (periodic) and chronic (persistent temperature) physical risks in the long term.

Combines a Markov-switching DSGE model with empirical estimates of losses from acute and chronic physical risks to conduct a scenario analysis of macro-fiscal implications.

Cumulative income losses could reach up to 18.6 percent by 2050 and 50.6 percent by 2100.
Scaling up investments in structural resilience and adaptation can partially mitigate these losses—raising output by up to 12.3 percent by 2050 and 31 percent by 2100.
Investments in resilience also generate long-term fiscal savings (quantitative magnitudes are presented in the paper’s scenario analysis).

Scale up investments in structural resilience and adaptation to reduce output losses from El Niño Costero events and rising temperatures.
Strengthen adaptive capacity across sectors most affected: fishing, agriculture, construction, and energy.
Use scenario-based macro-fiscal analysis to inform prioritization of resilience investments that both raise output and yield long-term fiscal savings.

IMF Working Paper No. 2025/144