The Peruvian economy is expected to grow 3.4% by the end of this year, despite El Niño phenomenon, driven by better economic momentum, strong domestic demand, greater private investment, and higher prices for exported minerals,
These resources will be used to finance measures to address El Niño 2026–2027, boost infrastructure, strengthen public security, and fund health, education, other services, and essential obligations.
"The overall context is as follows: fortunately, the Peruvian economy has been performing very well so far this year. Between January and July, we are growing 3.1%, which is no small feat," Cuba emphasized.
"We are experiencing one of the worst El Niño events in the past 70 years. Normally, when an event of this nature occurs, Peru can not only stagnate but also enter a recession," he added.
For example, Cuba noted that El Niño phenomenon which affected Peru in 2023 caused the Peruvian economy to contract by 0.4%.
Similarly, in 1983, a climate event of the magnitude of the one currently affecting the country caused the Peruvian economy to shrink by more than 5%.
"So, what is remarkable here is that this time is different: an El Niño phenomenon of this magnitude is occurring while we are highly dynamic, growing 3.1% (from January to July 2026), it is possible that the economy could end the year with 3.4% growth," he emphasized.
Likewise, the government official highlighted that Peru is in a good position, with "very strong domestic demand" growing at nearly 6% and private investment expanding by 15.5% during the first half of this year.
"Today, there are hardly any countries in Latin America that can show such a remarkable performance in private investment amid El Niño phenomenon," he underscored.
More optimistic private sector
On another note, the Ministry of Economy and Finance (MEF) head said the Peruvian private sector has received the current Government very positively.
"The economic outlook is almost at its historical highs recorded in 2016, and what gives us the greatest reason for optimism is the question, 'Will you hire workers or not over the next 12 months?'" Cuba emphasized.
The government official noted that the 12-month hiring expectations index stands at 65 points, the highest level since the survey was first published in 2013 by the Central Reserve Bank (BCR).
He indicated that this response from the private sector is highly significant because the managers who hire workers are expressing strong enthusiasm about increasing their payrolls after El Niño phenomenon.
Minister Cuba noted that, fortunately, as a result of notable economic growth and Peruvians' good fortune in benefiting from high commodity prices, tax revenue collection is improving in real year-on-year terms.
He explained that this means the annual change already factors in inflation, adding that it has grown by an average of 15% in real terms over the past 12 months.
The Cabinet member noted that tax revenue collection is growing by 11% in real terms, a rate 3.5 times higher than Peru's GDP growth.
"That also enables us to successfully address the spending pressures faced by any developing economy, as is the case with the Peruvian economy," Cuba pointed out.
"So, this strong performance in tax revenue collection has been reflected in the fiscal deficit," he added.
The minister noted that the fiscal deficit stood at 3.4% in 2024, 2.8% in 2023, and 1.7% in 2022, and is now close to 1% as of August.
"What is the target for this year? 1.8%. We have room to increase public investment and public spending without affecting the fiscal target for the year, which is 1.8% of Gross Domestic Product (GDP)," he underscored.
Low country risk and mortgage rate
The minister highlighted that Peru's country risk stands at a historic low of 100 basis points, down from 200 basis points four years ago.
"Why is that important? Because it is key to the cost of mortgage credit," he underlined.
The high-ranking official explained that if Peru's country risk is low, then "Peruvian families will have greater access to mortgage credit at much lower interest rates."
For example, the government official noted that mortgage interest rates are around 14% in Colombia, while they are close to 18% in Mexico and Brazil.
It should be noted that, according to recent statistics from the Superintendency of Banking, Insurance and Private Pension Funds (SBS), the average interest rate for mortgage loans granted by banks in Peru is 7.64%
"So, in the case of Peru, sound macroeconomic performance by the Central Reserve Bank, which keeps country risk low, makes a boom in the real estate sector possible," he said.
Furthermore, the minister said the MEF's responsibility is to keep country risk low in order to reduce the cost of credit over the long term.
Thus, both the Central Reserve Bank (BCR) and the MEF affect the country's yield curve in the short, medium, and long term.
"With these positive business prospects, high commodity prices, and fiscal stimulus, we expect the economy to perform very well this year, even accelerating between now and December," he stressed.
"According to our calculations, the worst month of the year in terms of economic activity would have been June; for the remaining months through the end of this year, we expect growth to be around 2.5% or 3%. That would bring us to 3.4% growth this year and next year with El Niño phenomenon," Cuba indicated.
The MEF chief highlighted Peru's strong macroeconomic indicators.
"That is very noteworthy," Cuba accentuated, adding that going forward, after El Niño, annual growth of close to 4% is expected.
He noted that Latin Focus, which conducts economic surveys in Latin America, forecasts average economic growth of 2.3% for Latin America and the Caribbean through 2030. Meanwhile, Peru is projected to post average growth of 3.8%.
"In other words, almost twice the growth expected for Latin America and well above the growth expected for Colombia, Argentina, or even Chile," the minister said.
"That shows sound economic management and, above all, resources to be spent by Peruvians, with more resources for Education, Health, Defense, and Interior. Where does the money to fund these needs come from? From economic growth, and we can even improve this further with our fiscal plan," Cuba indicated.
"We expect to significantly reduce tax evasion next year to create more fiscal space," he concluded.
(END) MDV/MVB