Peru Economic Outlook

Summary

In Peru, activity continued to surprise to the downside. The strong slowdown in GDP in 2014 is a reflection of a set of factors. No major structural reforms were made over recent years, which weakened the rise in productivity and competitiveness and, consequently, potential output growth. The reversal of favourable foreign conditions also contributed to lower GDP growth. The downward correction in metal prices and costlier foreign financing had an impact, for example, on the strong slowdown in mining investment, which accounts for somewhat less than 25% of total private investment. Furthermore, short-term factors such as supply issues at two of the country's largest copper deposits and the contraction in public investment by sub-national governments exacerbated the slowdown. Lastly, there was a cyclical moderation of private spending on investment and consumption.

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