The Peruvian Institute of Economics (IPE) announced on Thursday during its “2026-2027 Economic Outlook” online seminar that it has raised its 2026 GDP growth forecast for Peru from 2.9% to 3.3%, and its 2027 forecast from 2.8% to 3.4%. The institute attributed the upward revision mainly to private investment expanding at double-digit rates in the first half of this year.

Víctor Fuentes, IPE’s Public Policy Manager, stated during the seminar that private investment is expected to grow 12.8% in 2026 and 11.5% in 2027. This momentum is built on a dual foundation of strengthened business confidence in the new government and sustained high terms of trade – robust global demand for metals will continue to support Peru’s export prices. The IPE also raised its private consumption forecast, projecting 3.6% growth over the next two years, supported by continued formal employment growth driven by private investment expansion.

In the first five months of this year, Peru’s economy had already grown 3.2% year-on-year, primarily driven by 4.6% growth in non-primary activities. The IPE noted that private investment recorded double-digit growth of 14.4% in the January-May period, buoyed by real estate investment, self-construction, mining project advancements, and infrastructure works such as Metro Line 2. Business confidence, which had been in pessimistic territory for two months, returned to optimistic territory in June. The composition of the new Congress is also expected to reduce political instability and frequent official turnover – over the past five years, the average tenure of the Minister of Economy and Finance was just six months.

However, the IPE also clearly identified major risks to economic growth. The most severe threat comes from the coastal El Niño phenomenon (FEN). The Peruvian ENFEN Committee warned between May and June that the probability of a strong El Niño event between July 2026 and early 2027 had risen from 18% to 59%. The IPE estimates that a strong El Niño could reduce GDP growth by 0.7 and 0.8 percentage points in 2026 and 2027, respectively. Without this climate event, Peru’s economy could have grown above 4% in both years.

Inflationary pressures represent another major risk. Since the outbreak of the Iran conflict, Peruvian inflation has remained above the Central Reserve Bank’s target range for four consecutive months, mainly driven by rising fuel prices. Fuentes noted that the impact of inflation on private consumption will depend on the duration of the conflict and its effect on energy markets.

Peru’s economy has already been dragged down by declining primary activities. In the first five months of this year, primary activities fell 1.9%, mainly due to contraction in fisheries and related manufacturing. During the first anchovy fishing season in the north-central waters, only 25% of the allocated quota was completed, as fishing was suspended to avoid endangering the sustainability of marine resources.

The economic outlook seminar featured Nicolás Etrovich, Latin American economist at Morgan Stanley, as a guest commentator. IPE senior economist Paola Herrera served as moderator. The IPE also noted that without considering extraordinary revenues from mining, Peru’s fiscal deficit would approach 3% of GDP, exceeding the targets set for 2026 and 2027.