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Overview

  • The COVID-19 pandemic has had a devastating impact on the country. A strict and prolonged quarantine led to a decline in GDP of 11.1 percent in 2020. Employment fell an average of 20 percent between April and December. In response, the government launched  a global program of economic compensation and aid to protect the vulnerable population and support businesses, which includes cash transfers, postponement of tax payments and credit guarantees for the private sector. This program has mobilized resources equivalent to 20 percent of GDP. Despite this effort, the economic slowdown and rising unemployment have driven up the poverty rate by some 6 percentage points, to around 27 percent in 2020, pushing almost two million people into poverty.

    The public deficit increased to 8.9 percent in 2020, from 1.6 percent the previous year. Owing to the sharp decline in economic activity, revenues fell dramatically. Additionally, the fiscal component of the aid program (healthcare expenditures, social transfers and payroll subsidies, among others), estimated at 7 percent of GDP, raised government expenditures. With this, the public debt had reached 35 percent of GDP by the end of 2020, above the legal limit of 30 percent.

    In terms of external accounts, export and import volumes fell sharply. Notwithstanding, the current account of the balance of payments showed positive changes in 2020, thanks to better terms of trade, especially in the second half of the year.

    Considering the depth of the recession in 2020, a strong rebound is expected for 2021, assuming that public investment will be faster paced and that better international conditions will result from the implementation of the COVID-19 vaccination campaign. At the domestic level, the prevalence of some restrictions, risk aversion and uncertainty may slow the recovery of private spending. In this context, despite a strong rebound, GDP would remain below the pre-pandemic level.

    The economy is now expected to stabilize at rates close to those recorded in the pre-crisis period. The challenge for the Peruvian economy lies in accelerating GDP growth, promoting shared prosperity, and providing citizens with protection against shocks, both generalized and individual. To this end, the government must strengthen provision of public services and regulatory quality, generate protection plans, provide improved connectivity infrastructure and formulate policies to reduce rigidities in factor and product markets.

     

    Last Updated: Apr 09, 2021

  • The CPF FY17-FY21 focuses on eight critical objectives structured across three pillars: (i) Productivity for growth; (ii) Services for citizens across the territory; and, (iii) Natural resource and climate risk management. The CPF reflects the WBG’s commitment to provide Peru with integrated solutions, combining both global knowledge and smart financing -- all designed against the backdrop of the country’s need to strengthen its institutions and increase the efficiency in the use of public resources.

    The WB portfolio includes 15 investment projects totaling around $862 m. In August 2020, Peru fully disbursed the IBRD contingent lines of credit for $2.6B to finance cash transfers for the Covid emergency. Since 2016, the WB provided the platform to issue catastrophe bonds that collectively provide US$1.36 billion in earthquake protection to Peru and other Pacific Alliance countries. In particular in the context of the pandemic, the Bank has deployed a number of interventions:

    • A recently approved $750m DPL focused on strengthening institutions to mitigate the social and economic impact of the COVID-19 pandemic and reinforcing structural foundations for an inclusive and climate-smart economic recovery.
    • The second in a series of two Human Capital DPLs for $350m focuses on Early Childhood Development (ECD) and support to teachers to improve the quality of education, along with measures to respond the new challenges posed by the pandemic for the delivery of ECD, basic education, and health services.
    • A proposed $35m IPF “Peru Strengthening of the Public Health Emergency Preparedness and Response Project”
    • Extensive technical assistance to improve the country’s social safety net, financial inclusion, remote teaching and school reopening, epidemiological surveillance, gender based violence, and migration (Peru hosts more than a million Venezuelan migrants). 

    IFC's committed portfolio of $169m works with 10 institutions in the country. IFC's portfolio by industry includes financial institutions ($79.2m); infrastructure ($46.1m); logistics ($37.4m); oil, gas & mining ($6.3m); and, telecommunications ($2.0m). IFC´s additional mobilized resources ascend to $95.7m. The IFC portfolio has been declining in recent years (from 21 institutions and $773.4m in 2014) mainly due to prepayments and exits that were motivated by strong local market conditions. During recent years there has been abundant liquidity in the local banking and pension systems, displacing IFC's resources and limiting its range of action.

    MIGA’s gross exposure. The Agency’s current active program ($247m) with Santander Central Bank Mandatory Reserves Coverage project.

    Last Updated: Apr 05, 2021

  • Detailed performance results may be found at  Peru - Performance and learning review of the country partnership strategy for the period FY16-FY21.

     

    Productivity for growth

    The first pillar of the World Bank’s Country Partnership Framework with Peru 2016-2021 (CPF) focuses on productivity and covers four objectives: improve connectivity, ease the barriers to formalization, facilitate absorption of skills and technology by small and medium size business and enhance the environment for sustainable private investments. Significant advances have been made in this pillar.

    The Sierra Rural Development Project supported improving assets and economic conditions of local producers from six regions (Apurimac, Ayacucho, Huancavelica, Junín, Huánuco and Pasco). The increase in the value of principal productive assets of local producers was estimated to be 63.8 percent, benefiting 56,837 households. Moreover, the business plans implemented under the project exhibited high performance. At closing, the project reported an increase of 35 percent in net sales volume.

    The Second Rural Electrification Project installed infrastructure with the capacity to connect 42,669 rural households (about 169,000 people), thus increasing the country’s rural electricity coverage by 2.1 percent. The program was also instrumental in consolidating an innovative model for regulated service by electricity distribution companies using solar PV systems to serve people that could not be reached by the grid. Moreover, it supported family producers, small and micro-enterprises, and cooperatives to adopt electricity and use it for multiple purposes. It is estimated that the program has benefited directly 4,376 rural producers, including 1,569 women producers.

    The Basic Education Project sought to improve the Ministry of Education’s (Minedu) capacity to evaluate student learning, instructional practice and school leadership in Basic Education. Minedu’s capacity to assess student learning outcomes has been strengthened, as measured by the number of cycles of preschool, primary, and secondary education levels with student learning outcomes analyzed by the project. In addition, Minedu’s strengthened capacity to monitor instructional practice is reflected in the publication of a comprehensive report analyzing pedagogical practices over the course of four national studies of classroom instructional practice. Likewise, Minedu’s strengthened capacity to evaluate school leadership resulted in 18,477 school management positions staffed through the competitive evaluation of over 53,699 candidates.

    The Higher Education Quality Improvement Project aimed at improving Peru’s higher education quality assurance system through the promotion of self and external evaluations, the financing of improvement plans, and the provision of information. There was notable achievement in both the number of self-evaluations and external evaluations finalized. The project provided technical assistance to 135 higher education institutions. This supported 233 quality committees and 413 instances of technical assistance. Financing under the Fund for Quality Enhancement (Fondo de Estímulo de la Calidad) was provided to 60 public pedagogic and technological institutes that required external evaluation as a final step in the process of accreditation of National System for Evaluation, Accreditation, and Certification of the Quality of Education (SINEACE). By completion, 1,383 self-evaluations had been carried out in Quality Assurance Information (SAES) and 456 external evaluations had been finalized as part of the process of higher education quality assurance. Nearly 80 percent of the institutes that received financing for carrying out external evaluations under the project obtained the necessary accreditation from SINEACE.

    The Social Inclusion Technical Assistance Loan aimed at strengthening the Ministry of Inclusion and Social Development’s (Midis) systems and capacity to improve the performance of its programs and to monitor social inclusion policy. With the support of the project, Midis consolidated and launched several information systems with the objective of improving the internal management processes of the social inclusion sector, and to strengthening the transparency and accountability of its programs, including the National Register of Social Programs, the National Social Registry and Peru's Household Targeting System (Sistema de Focalización de Hogares, SISFOH), amongst others. The project, through the support of these systems, also improved the performance of the Midis programs. All Midis programs, with the exception of Juntos, uninterruptedly increased their coverage during the period 2012-2017. Finally, cash transfers through Juntos and Pension 65 do show a positive effect on poverty, as they can explain as much as 3.4 percentage points of extreme poverty reduction in rural areas for 2016.

    Services for citizens across the territory

    The CPF’s second pillar focuses on improving the delivery of services and involves three objectives: improve water and sanitation services in key urban areas, modernize delivery of health and nutrition services for the poor, and expedite the processing of family and commercial cases by the justice system. Significant contributions have been made in this regard.

    The Results Nutrition for Juntos Project aimed at increasing the demand for nutrition services by strengthening the operational effectiveness of Juntos (a conditional cash transfer program). The percentage of children under 12 months that received the complete health checkups scheme (CRED) according to their age in the areas of intervention of the Juntos Program targeted by this operation increased from 63.9% in 2011 to 86.4% in 2017 and the same indicator in children under 36 months increased from 67.2% in 2012 to 70% in 2016. Added to that the percentage of children younger than 36 months affiliated to SIS and with complete and timely CRED in the areas of intervention of Juntos in Amazonas, Cajamarca, and Huánuco regions increased from 43% in 2011 to 88.5% in 2017.

    The Justice Service Improvement Project II supported improving the quality of justice services, through the successful implementation of the e-filing and electronic notification systems that translated into quicker and more secure processes. In addition, in the case of the Judicial Academy (AMAG), the project successfully supported the development of a training program for magistrates and prosecutors. The consolidation of the AMAG’s training programs raised the technical capacity of legal service providers as evidenced by the increase in the number of average lecture hours per participant from 23 in 2011 to 44 hours in 2015. Furthermore, the implementation of the online training platform allowed to increase the reach, as evidenced by the increase in the number of judges and prosecutors trained from 682 in 2011 to 4,798 by 2015.

    Natural resources and climate change risk management

    Finally, the CPF’s third, and last pillar, focuses on strengthen the management of natural resources and climate change risk management.

    The Cusco Regional Development Project aimed at improving the quality of tourism and solid waste management services and increase the resilience of the tourism sector to the impacts of natural disasters in the provinces of Calca, Urubamba, and Cusco. The project completed the Urubamba sanitary landfill, one of the first of its kind in Peru and the one with the largest capacity in Cusco, and purchased machinery to operate the landfill and equipment for trash collection, recycling and street sweeping.

     

    Last Updated: Apr 05, 2021

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LENDING

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

*Amounts include IBRD and IDA commitments


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Additional Resources

Country Office Contacts

PERU +51 1 622-2300
Avenida Álvarez Calderón 185, San Isidro - Lima
jcasapiaboero@worldbank.org
USA +1 202 473-1000
1818 H Street NW, Washington, DC 20433
jcasapiaboero@worldbank.org