Worrying setback in Peruvian productivity: impact on long-term economic growth

Peruvian productivity has suffered a setback of 20 years, as revealed by the Peruvian Institute of Economics (IPE), placing the country at levels lower than those recorded in 2004. This concerning situation was exposed by Teodoro Crisólogo, senior economist at the IPE, who warned that this decline directly impacts the nation's economic growth capacity. During the conference 'Peruvian Economy: Growth Perspectives 2024-2025', Crisólogo emphasized that the lack of reforms to reverse this significant loss of productivity in recent years is one of the factors that have contributed to this situation. Despite this, the IPE raised its economic growth projection for this year from 2.4% to 3%, based on the growth of the Gross Domestic Product (GDP) in April and other positive variables. However, economic prospects for 2025 remain modest at 2.8%, due to the uncertainty generated by the pre-election scenario and its impact on business confidence. According to Crisólogo, the International Monetary Fund's estimates for the next five years place Peru's growth around 2.4%, far from the 2014 projections that reached 5.8%. Regarding the request for legislative powers by the Executive, Crisólogo pointed out that while these measures are not a determining factor to boost the economy, their approval does not guarantee a significant change in the long-term dynamism of the Peruvian economy. On the other hand, Alexander Müller, Chief Economist at Bank of America, warned that the ongoing political crisis in the country could keep business confidence restricted, making it difficult for a significant increase in private investment, despite high metal prices that could boost the economy. Despite the 1.4% growth recorded in the first quarter, Peru lags behind other countries in the region such as Brazil, Chile, and Mexico. The generation of 132,000 jobs in the main cities of the south, especially in sectors like commerce and services, has been a positive point in the labor market, although there is still work to be done. In April, economic growth was driven by domestic demand and consumption, as well as the recovery of sectors like traditional agriculture and industrial fishing, which were affected by climatic phenomena the previous year. For the coming months, sectors such as fishing and agriculture are expected to continue contributing to the recovery, although the sustainability of this growth will need to be verified. In summary, the Peruvian economy faces significant challenges in terms of productivity and growth, requiring structural reforms and a stable political climate to enhance its development. The uncertainty generated by the pre-election scenario and the current political fragility represent obstacles to private investment and business confidence, fundamental aspects to boost the country's economy in the medium and long term.