Over the past decade, Peru has been one of the region’s fastest-growing economies. Between 2005 and 2014, the average growth rate was 6.1% in a context of low inflation (2.9%, on average). A favorable external environment, prudent macroeconomic policies and structural reforms in different areas combined to create a scenario of high growth and low inflation.

The country has now entered a more challenging period since growth slowed in 2014 as a result of adverse external conditions, a corresponding decline in domestic confidence and fewer investments. Adverse weather conditions also affected the fishing industry and the implementation of the public investment program. Consequently, gross domestic investment and exports declined by 4.8% and 1%, respectively, in real terms. Nevertheless, the 2014 GDP growth rate remained above the regional average (2.4% versus 0.8%) and inflation was only slightly above the target rate for the year (3.2%). 

In 2015, growth in Peru is expected to be similar to that of 2014. The country should progressively recover to an average rate of 4% in 2016-2017. Large mining projects are expected to begin in the next two or three years. Additionally, the country will implement a countercyclical fiscal policy to support aggregate demand and the ongoing application of structural reforms will assure the continued confidence of private investors.

On the external front, the main challenges that may have an impact on economic growth include:

  • The decline in commodity prices, which is closely related to the economic slowdown in China, one of Peru’s main trading partners.
  • A possible period of financial volatility associated with the expectation of higher interest rates in the United States.

On the domestic front, GDP estimates are vulnerable to the following:

  • The occurrence of a strong or severe El Niño weather phenomenon.
  • Delays in the implementation of public and private investment programs.
  • Uncertainty associated with the upcoming presidential elections.

The effects of robust growth on employment and income have significantly reduced poverty rates and boosted shared prosperity. Between 2005 and 2014, poverty rates fell by more than half, from approximately 55.6% to 22.7% of the population (INEI). It is estimated that in 2013, nearly half a million people escaped poverty in the country. 

The share of the population living below the official extreme poverty line also declined dramatically between 2005 and 2014, from 15.8% to 4.3%. Extreme poverty is highly rural and is concentrated in 8% of districts in Peru, which are located in the regions of Cajamarca, Piura, La Libertad and Apurímac. A key feature of growth in Peru is its wide base. This is evidenced by the decline in the Gini Index, which measures income inequality, from 0.49 in 2004 to 0.44 in 2014, although the overall improvement in total inequality hides significant geographical differences. Whereas the Gini Index in rural areas decreased by just 3 points between 2004 and 2013 (from 0.44 to 0.41), urban inequality declined by 5 points (from 0.45 to 0.40).  

Looking ahead, major challenges will include achieving stronger, more sustainable economic growth and further strengthening linkages between growth and equity.  To achieve sustainable, balanced growth, Peru should develop public policies that accelerate decentralized growth, with an emphasis on its mid-sized cities.

To ensure economic growth with equity, the focus should be on the segment of the Peruvian population that continues to be vulnerable to economic shocks and that could fall back into poverty, which would reverse the progress made over the past decade. The Government of Peru has identified priority areas to prevent this from occurring. These include closing infrastructure gaps, increasing the quality of basic services such as education and health, and expanding access to markets for the poor and vulnerable segments of the population.

The government’s current program aims to expand access to basic services, employment and social security; reduce extreme poverty; prevent social conflicts; improve the surveillance of potential environmental damage; and reconnect with rural Peru through an extensive inclusion agenda.

Last Updated: Sep 29, 2015

The World Bank’s Country Partnership Strategy (CPS) for 2012-2016 focuses on supporting the government in improving equity through social services, infrastructure and competitiveness, while preserving macroeconomic stability. 

The CPS is closely aligned with the government’s strategic vision of strong economic growth with greater inclusion. It focuses on areas in which the World Bank Group (WBG) can provide more added value. The CPS has four strategic objectives:

  • Increase access and quality of social services for the poor;
  • Connect the poor to services and markets;
  • Support sustainable growth and productivity; and
  • Promote inclusive governance and public sector performance.

As Peru is becoming a stronger middle-income country, demand for knowledge services is increasing. There is also a demand for implementation support for government programs and projects.

The International Bank for Reconstruction and Development (IBRD) portfolio in Peru has operations totaling US$ 1.713 billion in October 2015. The WBG will continue to work to generate synergies among the International Finance Corporation (IFC), the IBRD and the Multilateral Investment Guarantee Agency (MIGA).

The IFC has implemented a successful program of investment and advisory services in Peru, in coordination with the IBRD. The IFC’s US$ 893.9 million investment program responds to the growing private-sector demand with innovative, competitive financial and advisory products. The main objective is to promote sustainable economic development and an entrepreneurial and investment climate. Investment will focus on infrastructure for development, clean energy and finance and insurance.

One example of this effort is the support to Financiera Edyficar, a microfinance institution that provides loans to expand the portfolio of rural enterprises in Peru.

Last Updated: Sep 29, 2015

  • Increase access to and quality of social services for the poor

Significant advances have been made in this pillar, particularly in areas associated with safety networks, education and basic health, as well as justice administration services. Coverage of safety network programs, such as the conditional cash transfer program Juntos, increased from 700 to 900 districts and now includes the poorest districts in the country. While Peru experienced a slight increase in total malnutrition rates in rural areas, results in the regions where the World Bank is working with the government (Amazonas, Cajamarca and Huánuco) improved during 2012-2013 (29% to 27%).

In education, the World Bank supported the implementation of an evaluation system based on students’ learning, teaching internships and school leadership in basic education (kindergarten through Grade 11). The IFC supported the construction of a new 140-bed hospital in Lima, which can serve over 580,000 patients annually. Additionally, the Bank supported the creation and development of a new enterprise to operate across market segments in technical training, university education and basic education (K-11).

Access of the poor to justice administration services has also improved through the establishment of legal aid centers in densely populated peri-urban districts, which in turn drove the increase in the number of consultations, from 100,000 in 2011 to 149,000 in 2014.

  • Connecting the poor to services and markets

Government efforts to connect the poor to services and markets are contributing to increasing income and improving basic service quality in target areas. However, challenges remain for achieving greater impact. The coverage and quality of water and sanitation services has improved in both urban and rural areas, as evidenced by the increase in daily hours of water service, from 16 in 2011 to 19.2 in 2013 in Lima, as well as by the decrease in the incidence of blocked sewer lines.

Transport programs have significantly improved access to markets and services. The Decentralized Rural Transport Program rehabilitated 3,277 kilometers of rural roads, which has reduced travel time to schools. This in turn has led to a 19.2% increase in school enrolment rates among children aged 12 to 18.  The private sector has also played a key role in expanding transport infrastructure in recent years.

The IFC has actively supported the development of infrastructure to facilitate access to markets, including: the modernization and expansion of the Port of Callao, which has increased its annual capacity to 1.2 million 20-foot-equivalent units;  the construction and operation of two power lines in the highlands of central Peru and in the northeastern Amazon region, with an expected capacity of 220 kV and 138 kV, respectively; the expansion of the international airport in Lima; and in Arequipa Region, the rehabilitation of a major road and the development of a 168 MW run-of-the-river hydroelectric power plant,  which will generate an average of 838 GWh annually.

The government incorporated a rural electrification model implemented in a Bank-financed project for the continued development of the sector. This model uses distribution firms to develop, build and co-finance rural electrification sub-projects. The IFC investment through the Cheves hydroelectric power plant has also contributed to increasing the country’s power supply.

Finally, thanks to a US$300 million loan approved in September 2015, the Line 2 Project of the Lima Metro will drastically reduce travel times in Lima by providing a new transport system that will alleviate city traffic and pollution.

  • Sustainable growth and productivity

The WBG’s program contributed to increasing productivity in rural areas of the country. The Bank has been working to increase assets and improve economic conditions of rural families. The first phase of the Development of the Rural Highlands Project supported approximately 35,000 families (nearly 10% of rural families) to increase the net value of their domestic production by 42% in selected areas of  Apurímac, Ayacucho, Huancavelica, Junín, Huánuco and Pasco. With respect to financial aspects of rural development, the IFC has been supporting four microfinance institutions to expand their client base in rural areas and has also helped to promote better practices in irrigation and the agricultural export industry.

The WBG program also has contributed to improving access to and quality of financial services for small and medium-sized enterprises. The IFC financed numerous projects to support insurance services and the expansion of the microfinance portfolio in the private sector to increase bank penetration, including in rural areas, as well as access to financial services to underserved microenterprises in Peru. The combined microfinance operations of the IFC benefited more than 700,000 microentrepreneurs in rural areas. In the past two years, the World Bank has been working intensively to develop different financial inclusion projects requested by the Central Bank and the Banking Regulatory Agency. 

The WBG program has worked with the Ministry of Education and the private sector to strengthen higher education services. The IFC has been collaborating with the private sector to improve the quality of university education and vocational training services in Peru, with new investments in infrastructure for these sectors. This includes the building of two new university campuses in Lima, which are expected to serve more than 50,000 students.

Initiatives such as the Project to Strengthen the Sustainable Management of the Guano Islands, Isles and Capes National Reserve System as well as the Dedicated Mechanism for Indigenous People and Saweto Local Communities, which have received grants from the Global Environmental Facility (GEF) and the Strategic Climate Fund, support agricultural innovation, biodiversity and the sustainable management of ecosystems, which are a valuable environmental heritage and a source of income for thousands of families living along the Peruvian coast and in the Amazon region.

  • Inclusive governance and performance of the public administration  

Support from the WBG has focused on strengthening fiscal management and public investments at the national and local levels. Initial results have been encouraging. The IFC’s advisory plan has helped improve the capacity of 30 municipalities to invest mining royalties. As a result, 80% of the municipalities improved their investment management rating by 20% and the remainder by 15%, as compared with their initial rating. The WBG has also been working with the Ministry of the Economy and Finance to define a strategy for analyzing the sub-national investment cycle and making recommendations to reduce obstacles and transnational costs, with a view to improving the efficiency of public investments.

The Catastrophic Risk Deferred Drawdown Option (DDO) has also helped Peru reduce fiscal vulnerabilities in light of the frequent natural disasters affecting the country. Moreover, the WBG is conducting an evaluation for the government in an effort to reduce the vulnerability of public schools throughout the country in the case of earthquakes and to develop a school infrastructure plan that guarantees adequate construction, operational and maintenance procedures. At the sub-national level, the recently approved Cusco Development Project is designing an early warning system to respond to natural disasters in Cusco Region.

Studies and evaluations

The World Bank carried out a series of studies, assessments and systematizations, including: the framework of relations with indigenous peoples for the regional transport support project; a feasibility study of the environmental management plan; and a report on the social impact of the water and sanitation optimization project on Lima properties. Publications include: “Promoción de la escala y la densidad de las redes de agentes en Peru” (Promotion of scaling up and density of the network of agents in Peru); and “12 cosas que quizá no sabe sobre el Banco Mundial en el Perú” (12 things you may not know about the World Bank in Peru).

  • Discussion fora

In early 2015, the World Bank led the discussion on different aspects of economic development in Peru. To this end, it brought together several international experts who participated in events organized by the Bank. These included the presentation of the 2015 World Development Report: Mind, Society and Behavior; the international conference “Towards International OECD Standards: Experiences for Peru”; the event “Southern Countries: New Owners of the Global Economy?”; the Conference “Financial Inclusion: International Experience and the Peruvian Strategy”; the international conference “Promoting Growth through Effective Policies”; and the 2015 International Forum on Sustainable Finance.

Last Updated: Sep 29, 2015


Peru: Commitments by Fiscal Year (in millions of dollars)*

*Amounts include IBRD and IDA commitments