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After a rapid post-pandemic recovery, GDP grew by 2.7% in 2022, driven by domestic demand and exports. Government cash transfers and exceptional withdrawals from private pension funds stimulated domestic demand. Exports increased thanks to the elimination of health restrictions and the beginning of production of the Quellaveco mining project. GDP growth in 2023 will reach an estimated 2.4%, led by primary sectors and services. The pace of growth is expected to increase slightly over the next few years, to approximately 2.8%, assuming a gradual improvement in business confidence and renewed investment in large-scale mining projects.
Inflation has been on the rise since 2021, mainly reflecting the global increase in food and energy prices and the domestic demand stimulus to support the recovery following the health crisis, and, more recently, to the temporary interruption in local distribution chains. To curb inflation, the Central Bank tightened its monetary policy, raising the reference policy rate to 7.75% in January 2023, the highest rate in over two decades. At the same time, the government launched a one-time cash transfer to alleviate food insecurity, which was distributed in late 2022 and early 2023.
Nevertheless, poverty reduction has been slow. The 2022 poverty rate remained 3% points above that of 2019. Higher inflation and the sluggish recovery of the labor market affected vulnerable populations and the middle class alike. Nearly 700,000 formally middle-class Peruvians were at risk of poverty and another 700,000 slipped from a vulnerable situation to poverty.
