Peru has one of the best economies in South America region

Peru is one of the region’s fastest growing economies and is expected to remain as such in the medium term. Most recent estimates of real GDP growth for 2014 are above the regional average (3.5% for against 1.2% respectively). Inflation has been low within target range in 2013 (2.9%). A still favorable external environment, prudent macroeconomic policy, and deep structural reforms have combined to support this high growth, low inflation scenario in Peru. Recently, the country may be entering a challenging period as the growth momentum slowed down in 2013 as a result of adverse external conditions, a corresponding decline in domestic confidence and a decrease of investment.

The effects of strong growth on employment and income have significantly reduced poverty rates and boosted shared prosperity. Between 2005 and 2013, poverty rates were more than halved, from about 45% to 24 % of the population  (INEI). It is estimated that in 2013, nearly half a million people have escaped poverty in the country. An important feature of growth in Peru is that it appears to be broad-based, with estimates illustrating that the less well-off have benefitted more from growth than the average person in the country. While the overall mean per capita income for the region grew by about 5%, the growth rate of the lowest two quintiles was about 6.4%. In addition to this, there was a dramatic decline of about 10 percentage points, from 16.4% to 6%t, in the share of the population living below the official extreme poverty line. Though still high, income inequality in Peru, as measured by the Gini Coefficient, has declined from 0.49 in 2004 to 0.44 in 2013. Still, this improvement in aggregate inequality masks some important geographical differences. While the Gini in rural areas in 2004 and 2013 only fell by 1 point, urban inequality fell by 5 points. The year 2013, was the first time since 2010 that inequality decreased in rural areas.

Not only is extreme poverty highly rural, but it is also concentrated in a few districts. In 2012, almost half of the extreme poor were concentrated in approximately 8% of Peru’s districts. A large portion of these districts were located in the regions of Cajamarca, Piura, La Libertad and Apurimac. Extreme poverty reduction has been faster in some regions than others.  A majority of regions in the country have seen declines in extreme poverty between 2004 and 2013, with Huancavelica, Huánuco, and Puno having been the most dynamic.

Moving forward, the challenge will be to ensure to continue strengthening the links between growth and equity.  A large share of the Peruvian population remains vulnerable to shocks and could fall back into poverty, thereby reversing the progress achieved over the course of the past decade. The Government has identified priority areas to prevent this from occurring and these include closing infrastructure gaps, increasing the quality of basic services such as education and health, and expanding the access to markets for the poor and vulnerable segments of the population.

The Government of Peru’s current program aims to provide equal access to basic services, employment and social security; reduce extreme poverty; prevent social conflicts; improve the surveillance of potential environmental damages; and reconnect with rural Peru through an extensive inclusion agenda.