Elections, Congress and the Peru-Colombia territorial conflict; we forecast 2.2% growth in H2 2025; BCRP stands pat in August, but expected to cut 25 bp in September

PERU - Report 27 Aug 2025 by Alfredo Thorne

In this report, we cover three topics: political risks in the run-up to the general elections; assessment of the state of the economy following the strong June 2025 GDP performance; and our expectation that the Board of the Banco Central de Reserva del Perú will cut its policy rate by 25 bp at its September 11th meeting.

The political focus in Peru has turned to the general elections set for April 12th, 2026; to the composition of congressional committees; and to the territorial conflict between Peru and Colombia. We have reduced to 20% from 45% the probability that President Dina Boluarte will face impeachment during the rest of her presidential term (which runs to July 2026). During the week of August 18th, the Tribunal Constitucional (TC, Peru’s highest court), in response to a competence demand introduced by the executive branch a year ago and based on Article 117 of the Constitution, which indicates the charges that could induce the removal of the president, ruled that the president cannot be investigated during her term. The TC subsequently ordered the Attorney General’s office to suspend the investigation until after Boluarte’s term ends. Congress could still impeach the president, should it manage to gather the required two-thirds majority of votes. But we believe this is unlikely.

As projected in our forecast, real GDP accelerated in June, though we suggested 4.7% oya, slightly higher than the 4.5% published by the Instituto de Estadística e Informática (INEI). But much of the y/y growth was explained by the low base from June 2024 (in June 2024 real GDP advanced only 0.1% oya, much lower than the 3% average for the preceding five months). Moreover, using the official seasonally adjusted series calculated by the INEI, GDP increased 0.2% m/m in April, but fell 0.2% m/m in May and June 2025, confirming ongoing economic deceleration.

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