Peru's strong macroeconomic foundations have supported resilience, but raising living standards requires bold reforms. Growth will moderate amid global and domestic uncertainty and a lower potential growth rate. Fiscal discipline has weakened undermining credibility of the fiscal framework and tax revenues of only 17% of GDP limit resources for social and productive needs. Strengthening compliance with fiscal rules, while curbing inefficient subsidies and tax expenditures, improving revenue collection, and raising spending efficiency are priorities to ensure debt sustainability and finance these needs. Pervasive informality, affecting over 70% of workers and most firms, constrains productivity, fiscal capacity, and job quality. Reducing non-wage labour costs, simplifying labour and business regulations, and broadening access to affordable finance for micro and small firms would support formalisation and investment. Promoting equal opportunities by expanding early childhood education, improving school-to-work transitions, and narrowing gender gaps is vital to mobilise untapped human capital. At the same time, Peru must confront climate vulnerabilities by strengthening adaptation policies to build resilience and halting deforestation, expanding renewable energy, and decarbonising transport to meet its 2050 net-zero target.
