Political risks rise; growth forecast trimmed; fiscal deficit cut to 2.5% of GDP; Central Bank bends toward global risks
In this forecast report we cover three topics. First, we discuss the political situation, and argue that risks will rise starting on April 12th, when the 2026 electoral campaign begins. During this period, President Dina Boluarte will become vulnerable to impeachment, and we project the odds of impeachment at 55%.
Next, we discuss our economic forecasts. We have reviewed our three scenarios—the base, low and high cases. Although the economy outperformed through January, political and economic headwinds should moderate growth going forward. While we have trimmed slightly our forecast for a balance of payments surplus, it remains growth-supportive. But government finances are pulling in the opposite direction, and may subtract growth from late 2025.
Finally, we discuss the decision by the Board of the Banco Central de Reserva del Perú (BCRP, the central bank) at its March 13th meeting to stand pat at 4.75%. We now forecast no further cuts this year, with one 25 basis point hike in 2026.
Our new political scenarios are more cautious than previously. April 12th is a key date in politics, marking the beginning of the 2026 general election campaign. Boluarte is due to submit the official call for elections on that date. However, it also marks the beginning of the period during which Congress can impeach the president without forcing its own dissolution. The Constitution mandates that, should the president (be forced to) resign in the final year of his or her term, the speaker of Congress should take over, and Congress will continue in session until the end of the current presidential term, in this case on July 28th, 2026.
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