- GDP (PPP):
- $476.0 billion
- 2.2% growth
- 3.2% 5-year compound annual growth
- $13,380 per capita
- Inflation (CPI):
- FDI Inflow:
Peru’s economic freedom score is 67.7, making its economy the 50th freest in the 2021 Index. Its overall score has decreased by 0.2 point, primarily because of a decline in judicial effectiveness. Peru is ranked 7th among 32 countries in the Americas region, and its overall score is above the regional and world averages.
The Peruvian economy remains in the upper reaches of the moderately free category again this year despite ongoing political turmoil. Two weaknesses identified by the Index that continue to constrain economic freedom include relatively weak rule of law, which is reflected in Index scores for property rights, judicial effectiveness, and government integrity, and the need to make further reforms in the labor code.
IMPACT OF COVID-19: As of December 1, 2020, 35,966 deaths had been attributed to the pandemic in Peru, and the economy was forecast to contract by 13.9 percent for the year.
In the last third of the 20th century, Peru alternated between military rule and democracy. A violent, multi-decade guerilla insurgency was defeated in the 1990s by ex-President Alberto Fujimori, an authoritarian who nevertheless implemented a liberal economic reform agenda. Martín Vizcarra of the center-right Peruvians for Change party began his presidency in 2018 after allegations of corruption forced his predecessor to resign. After repeated clashes, the opposition-controlled Congress impeached Vizcarra and removed him from office in November 2020. Pro-Vizcarra street protests continued until Vizcarra’s successor resigned five days later. As of December, a caretaker government was in place. Peru remains the world’s second-largest producer of cocaine.
Peruvian law recognizes property rights, but the judicial system is slow to hear cases and issue decisions. Corruption is widespread and affects the whole of society and all levels of government, especially public procurement. Although President Vizcarra succeeded in passing three reforms aimed at curbing corruption in both the legislature and the judiciary, he was subsequently impeached and removed from office by Congress.
The top individual income tax rate is 30 percent, and the top corporate tax rate is 29.5 percent. Other taxes include value-added and financial transactions taxes. The overall tax burden equals 16.9 percent of total domestic income. Government spending has amounted to 21.3 percent of total output (GDP) over the past three years, and budget deficits have averaged 2.1 percent of GDP. Public debt is equivalent to 26.7 percent of GDP.
Starting a business and dealing with construction permits have become more expensive. The recovery rate when resolving insolvency is now higher. Labor laws are well defined but not evenly enforced. According to the World Bank, government transfers and subsidies for electricity, fuel, and a wide range of other sectors consume about 45 percent of the budget.
Peru has 19 preferential trade agreements in force. The trade-weighted average tariff rate is 1.8 percent, and 383 nontariff measures are in effect. The economy is relatively open to most foreign investment, but a lack of regulatory predictability impedes more dynamic investment. About 47 percent of adult Peruvians have an account with a formal banking institution. In 2020, reserve requirements were reduced to increase liquidity in the financial system.