Boluarte risks impeachment; growth likely to slow in 2025, with less policy stimulus
In this forecast report, we cover three topics. First, we discuss possible political scenarios; then we discuss our 2025 forecasts for the economy, government finances and the balance of payments; and finally we discuss our market forecasts. Our forecasts generally project greater risk, partly arising from the campaign leading up to the 2026 elections, and partly from the expected policies of the incoming U.S. Trump administration.
In our September forecast report, we argued that the probability of Congress impeaching President Dina Boluarte was below 50%. While this continues to be the case, the probability of impeachment increasing. We expect it to rise further after April 12th 2025, when Boluarte publishes legislation calling for the 2026 presidential, congressional and senatorial elections, and even further after July 2025. The Constitution mandates that, should the president resign in the final year of his or her term—that is, after July 2025—the speaker of Congress takes over as interim president, overseeing the elections, while the existing Congress continues in office until the next government is inaugurated (in July 2026). This is the scenario that most members of Congress would support.
It is difficult to predict with certainty whether Boluarte will be impeached; there are arguments both in favor of and against this outcome. In favor is that Boluarte has moved toward the left, and that the right-wing groups that control Congress now regard her as a liability. However, there are also arguments for a more peaceful transition to the new government, providing the political stability that Congress requires to pass critical legislature prior to the 2026 elections.
Since the publication of our September forecast report, we have grown more cautious, on the back of the anticipated political risk around the upcoming 2026 elections. In our new forecasts, we have reduced the weight of our base case scenario to only 55% probability, from 60%; increased the low case to 30% from 25%; and retained the 15% probability for our high case scenario.
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