Economic outlook

01/04/2020

Peru in 2020: Difficult times for the business environment

Donita Rodríguez, Head of Macroeconomic Analysis.

Due to the COVID-19 pandemic, the Peruvian economy is countering a shock of unprecedented nature and magnitude.
It is most likely that in March, GDP contracted by almost 20% compared with March 2019, generating a 5% fall in the 1Q2020. This has been the result of containment measures adopted by the Peruvian government (a 28-day mandatory social isolation) and of the production standstill observed in several countries in the world.
It is likely that the economic contraction in 2020 will be severe and long-lasting (annual GDP will fall by 5%). Consumption and investment will register their steepest falls of the past 20 years.
This scenario assumes, among other factors, a global recession and government measures accounting for 3% of GDP. In this exercise we have still not considered the additional measures announced by the government (which would raise impulse up to 12% of GDP).
Despite the adverse scenario in terms of economic growth, the depreciation of the Peruvian Sol against the U.S. Dollar will be limited and long-term financing costs will return to their average of the past 5 years (6.0%).

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