Following a decade of record-high growth, Peru’s economy has remained strong and resilient despite persistent global uncertainty, thanks to strong fundamentals, supportive terms of trade and sound policy management.

In the latest assessment of the Peruvian economy by the IMF’s 24-member executive board on Feb. 13, the IMF said that Peru has emerged as one of the fastest-growing and most stable economies in Latin America.

Over the period 2002―12, the Peruvian economy almost doubled in size, real GDP grew at an average annual rate of 6.3 percent (the highest 10-year average growth in Peru’s history), and the average annual inflation rate fell to 2.75 percent (the lowest in the region).

Economic growth has been gradually slowing toward potential, the IMF said. Real GDP growth moderated to 6.3 percent in 2012, down from 7 percent in 2011. Economic activity in 2012 was driven by investment, as the weak external environment took its toll on exports and worsened the external current account. 

With an exchange rate broadly in line with fundamentals, policies have been geared toward taming the pressure for the value of the new sol to rise, which was caused by a surge in capital inflows. This led to substantial intervention in the foreign exchange market ($13 billion in 2012) and sterilization of the liquidity created. At the same time, the fiscal position remained strong and the authorities have been able to rebuild fiscal buffers.

Favorable outlook

For 2013, real GDP growth is expected to remain around potential ― at 6.3 percent driven by strong internal demand ― and inflation to continue to fall as supply shocks unwind.

Upward momentum to growth and inflation could come from large capital inflows and strong credit dynamics in the context of ample global liquidity and continued low growth in advanced economies.

Private investment and household spending have both grown, boosting the economic outlook.

Although the external environment is still complicated, there was some progress in policy decisions in developed economies in 2012, which reduces the probability of any significant negative impact.

Next year Peru is expected to see 6.3 percent growth in consumption, and 10.3 percent growth in investment.

Moreover, its construction industry is forecast to enjoy 8.2 percent growth, and trade is projected to increase by 6.7 percent.

Mining is also expected to grow faster, at 7.5 percent, driven by new and continuing projects.

Peru expects strong growth in mining to be sustained in the coming years, which is dependent on the continued flow of investment to the sector and the completion of ongoing projects.