Western Hemisphere > Peru

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International Monetary Fund. Western Hemisphere Dept.
Over the last quarter of a century, Peru has become one of the most dynamic economies in Latin America. During this period, Peru built very strong policy and institutional frameworks and economic fundamentals while maintaining external, financial, and fiscal stability. The strength of the Peruvian economy was tested with the COVID-19 pandemic in 2020, when the economy collapsed, leading to a significant deterioration of the fiscal accounts. Subsequently, the economy recovered strongly in 2021, and the fiscal position strengthened considerably, while inflationary pressures emerged (in line with global trends). However, Peru is bearing a very high humanitarian and economic cost from the COVID-19 pandemic, sizable under-employment, and a large increase in poverty. These challenges and recent social unrest related to high energy and food prices point to the need to accelerate structural reforms to foster high and inclusive growth. While political uncertainty has risen, with frequent cabinet reshufflings, the authorities remain committed to maintaining their very strong policy frameworks and prudent macroeconomic policies.
International Monetary Fund. Western Hemisphere Dept.
The Chilean economy has rapidly recovered from the fallout of the Covid-19 pandemic, thanks to an impressive vaccination campaign and effective policy support. The authorities will continue leveraging on Chile’s very strong fundamentals and policy frameworks to safeguard the recovery, preserve macroeconomic stability, and boost inclusive and green growth.
International Monetary Fund. Western Hemisphere Dept.
After being hit very hard by the pandemic in 2020, both in terms of health and economic outcomes, Peru experienced an equally strong economic rebound in 2021. A new administration was inaugurated in July 2021 with a program focused on reducing inequality and improving social conditions, but limited support from Congress and lack of cohesion heightened political uncertainty. While real GDP surpassed its pre-pandemic level by 2021, labor force participation and total employment have not fully recovered yet. Poverty increased significantly in 2020 and, despite some improvement in 2021, remains higher than in 2019. On May 27, 2021, the IMF Executive Board completed the mid-term review of Peru’s continued qualification under the Flexible Credit Line (FCL) arrangement.
International Monetary Fund. Fiscal Affairs Dept.
In October 2021, the MEF asked Congress for the delegation of powers to legislate on tax matters with the aim of increasing tax collections and doing so by adding progressivity to the Peruvian tax system. The initiative being developed by the MEF contains (tentatively, to date) around 40 specific measures—some administrative, others related to tax policy—that the MEF hopes will, as a whole, generate additional revenue for the treasury. The tax collection impact of quite a few of the measures (including those pertaining to the mining sector) has not been estimated, whereas the measures for which there is a calculation are estimated to bring in a little over 1 percent of GDP in revenues. Given Peru’s low level of tax collections, both relative to its own historical trends as well as those of other countries in the region, the amount expected to be collected with the proposed reform is modest. However, increasing tax collections by enhancing progressivity would appear to be the right approach.
International Monetary Fund. Fiscal Affairs Dept.
In October 2021, the MEF asked Congress for the delegation of powers to legislate on tax matters with the aim of increasing tax collections and doing so by adding progressivity to the Peruvian tax system. The initiative being developed by the MEF contains (tentatively, to date) around 40 specific measures—some administrative, others related to tax policy—that the MEF hopes will, as a whole, generate additional revenue for the treasury. The tax collection impact of quite a few of the measures (including those pertaining to the mining sector) has not been estimated, whereas the measures for which there is a calculation are estimated to bring in a little over 1 percent of GDP in revenues. Given Peru’s low level of tax collections, both relative to its own historical trends as well as those of other countries in the region, the amount expected to be collected with the proposed reform is modest. However, increasing tax collections by enhancing progressivity would appear to be the right approach.
International Monetary Fund. Fiscal Affairs Dept.
The topics discussed in this report are tax regimes for small taxpayers (Chapter II) and the tax treatment of special economic zones (Chapter III). Although these aspects of the tax system have little direct effect on public finances, they affect many people and how those people make decisions or impact the positioning of certain regions relative to the rest of the country. Both are of social and political scope that is disproportionate to their magnitude of tax revenue collection, which is why their design must remain focused in its most strategic sense.
International Monetary Fund. Fiscal Affairs Dept.
The topics discussed in this report are tax regimes for small taxpayers (Chapter II) and the tax treatment of special economic zones (Chapter III). Although these aspects of the tax system have little direct effect on public finances, they affect many people and how those people make decisions or impact the positioning of certain regions relative to the rest of the country. Both are of social and political scope that is disproportionate to their magnitude of tax revenue collection, which is why their design must remain focused in its most strategic sense.