IMF says Peru unrest could dent growth, recommends temporary stimulus

IMF says Peru unrest could dent growth, recommends temporary stimulus

By Brendan OBoyle

(Reuters) – Perus economic outlook is “very uncertain,” but strong economic fundamentals could provide a buffer against prevailing risks, the International Monetary Fund (IMF) said on Thursday after an annual visit to the country.

The visit by the IMF‘s staff came amid political and social unrest that has shaken confidence in the resilience of Peru’s economy.

“Key domestic risks include an intensification of political uncertainty, social unrest over political developments, and natural disasters, which could hinder economic activity and risk the planned medium-term fiscal consolidation,” the IMF said in a statement.

Roadblocks and protests over the removal and arrest of then-President Pedro Castillo in December have cost Peru millions of dollars in damages and lost revenue.

“Recent political developments suggest that the government needs to work across the political spectrum to restore confidence,” the IMF said.

Congress continues to debate bringing forward presidential elections amid popular demands.

The IMF recognized that Peru retains “very strong fundamentals and institutional policy frameworks that underpin the resilience of the economy to external and domestic shocks.”

The IMF said inflation was Peru‘s most immediate policy challenge and said the central bank’s “data-driven approach remains appropriate.”

It also recommended a “targeted, temporary” fiscal stimulus given the slump in economic activity.

(Reporting by Brendan OBoyle; Editing by Isabel Woodford and Leslie Adler)