According to an analysis by the International Monetary Fund, Peru’s Gross Domestic Product will grow 8.5% in 2021, after a historic fall of 11.4% in 2020 due to the health and economic impact of the Covid-19 pandemic, in the If the second wave of the epidemic is brought under control towards the end of March, when restrictions could gradually be relaxed again in the second quarter and economic activity could regain dynamism, driven by domestic demand, according to an analysis by the International Monetary Fund ( IMF) carried out within the framework of Article IV on the Andean country.
In this sense, the IMF has indicated that the levels of activity prior to the pandemic will not recover until 2022. Specifically, the forecasts for 2022 and 2023 point to an expansion of 5.3% and 4.8%, respectively.
Despite this panorama, the institution has highlighted Peru’s “broad buffers” to mitigate the risks associated with the viral outbreak. These include a high level of international reserves (more than 37% of GDP), low public debt, access to the two-year Flexible Credit Line agreed with the IMF and other sources of financing, as well as a solid financial sector .
In its analysis, the Fund has recommended the use of supportive macroeconomic policies and the wide fiscal space available in the country. Thus, the structural reforms carried out by the Francisco Sagasti Administration should focus on the weaknesses that the pandemic has exposed, with emphasis on policies that increase productivity, improve government management and strengthen the social safety net.
On the other hand, the IMF has highlighted the structural weaknesses exposed after the pandemic. Among others, it has highlighted the weaknesses in the health sector, which contributed to the high lethality of the virus, poverty, low financial inclusion, high degree of informality, low digitization rate, limited teleworking capacity and instability politics.