Peru’s Economic Outlook in an Election Year: Risks, Resilience and Shifting Dynamics

Hugo Santa María noted that while US tariff measures are not currently targeting Peru, the local economy is expected to face a cooler environment at the beginning of the year due to electoral uncertainty. Still, he stressed that Peru’s economy has resilience and “will reach 2026 with momentum.” He also reminded that fear of an adverse electoral outcome tends to harm the economy more than the relief of a favorable one, particularly in consumption, where differences between sectors become most visible.

Donita Rodríguez projected that the exchange rate could hover between 3.50 and 3.60 soles to the dollar, though electoral volatility could push it closer to 3.70. She emphasized that while growth will remain relatively stable, it will be moderate, with local sales showing signs of slowdown. The asymmetrical impact of electoral uncertainty could widen the gap between sectors, leading to concerning scenarios. Unskilled workers, more sensitive to wage fluctuations, may experience sharper changes, with significant implications for both markets and businesses. Electoral uncertainty, she stressed, consistently puts upward pressure on the exchange rate.

Víctor Albuquerque highlighted the expansion of the public sector, with an estimated 1.6 million public workers, representing around 21% of the national wage bill. Public employees not only receive higher wages than their private sector counterparts but are also more decentralized: only 30% live in Lima, compared to 54% of private-sector workers, with significant portions based in the highlands and jungle.

He also pointed to the growing economic and demographic relevance of cities beyond Lima, such as Arequipa, Trujillo, Chiclayo-Lambayeque, Piura-Sullana, Huancayo, Ica, Cusco, Iquitos, Puno-Juliaca and Chimbote. Key drivers of this growth include the agroindustrial sector and major investment projects, particularly in transport and mining. Although mining-related protests in the south have diminished, challenges remain, especially regarding the government’s inconsistent prioritization of projects ‒ favoring new ones while sidelining those already underway.

Looking ahead, Hugo Santa María outlined three critical challenges for Peru as it transitions to a new government:

1. Demographic transition: Peru will soon stop benefiting from a “demographic bonus,” as fewer workers will support a growing elderly population, raising the risk of “growing old before reaching sufficient income levels.”

2. State capacity: Improving how the public sector spends and invests is essential to avoid stifling private-sector dynamism.

3. Insecurity as an economic issue: Rising insecurity is already reshaping how Peruvians generate income, with broader consequences for business and investment.

He added that Peru’s greatest challenge is not only navigating short-term electoral uncertainty but preparing for deeper structural shifts. The demographic bonus that once fueled growth is fading, leaving fewer workers to support a growing dependent population. Unless addressed, Peru risks aging before reaching a sustainable level of income. Coupled with weak state capacity and rising insecurity, these pressures demand urgent reforms to ensure that economic momentum can be sustained beyond 2026 and that growth translates into real opportunities for future generations.