Peru - Policies to stop hyperinflation and initiate economic recovery
Faini, Riccardo | De Melo, Jaime | Senhadji-Semlali, Abdel | Stanton, Julie
At the time of writing, the projections for 1988 inflation are no less than 2000 percent. The key reason underlying this inflationary acceleration is the growing public sector deficit in the face of the unpostponable balance of payment adjustment and a shrinking financial sector. This report, in four chapters, reviews the economic situation and proposes policies to effect a recovery. Chapter 1 reviews the evolution of the Peruvian economy, providing a year by year description of events leading to the present situation. The likely economic evolution in the absence of major corrective measures is discussed in chapter 2, along with a diagnosis of the current situation. The main economic issues are reviewed in chapter 3 and policy recommendations suggested for them. Finally, chapter 4 proposes economic policy to stabilize inflation and set the conditions for medium term growth.
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