Fujimori named president-elect; El Niño shock and external drivers buffet the economy; Velarde confirmed as Central Bank governor for five more years
In our first forecast report since Peruvians elected Keiko Fujimori (KF) as their next president, we first discuss the election process and the decision by the Jurado Nacional de Elecciones (JNE, the national electoral panel) to confirm her as president-elect, and outline the main challenges she’ll face between now and July 28, when she is scheduled to take office.
We also discuss our first forecasts since the election, in light of KF’s campaign statements, and the political and economic manifesto of her Fuerza Popular (FP) party. We argue that opposing forces will act on the economy in the form of the El Niño weather system, expected to arrive off the Peruvian coast in November; the surprisingly positive external environment; and the policies we expect the new government to implement. We have raised our 2026 growth forecast to 3.4% from 2.9%, while lowering our 2027 forecast to 3% from 3.2%. We argue that taming the large fiscal deficit will be one of Fujimori’s greatest economic challenges.
As promised during her campaign, Fujimori offered Julio Velarde another five-year term as governor of the Banco Central de Reserva del Perú (BCRP, the central bank). Velarde accepted, calming market uncertainty around the BCRP’s leadership. We see this decision as positive for economic stability and markets. The BCRP Board at its July 9 meeting kept its rates unchanged, and we forecast that it will stand pat until year-end, before cutting rates in 2027. We have also become more cautious on near-term inflation – we see headline inflation reaching 3.9% in December, above the previous forecast of 3.3% -- but are more upbeat on currency and bond rates.
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