IMF Working Papers

Building Macroeconomic Resilience to Natural Disasters and Persistent Temperature Changes: The Case of Peru

By Zamid Aligishiev, Daria Kolpakova

July 25, 2025

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Zamid Aligishiev, and Daria Kolpakova. "Building Macroeconomic Resilience to Natural Disasters and Persistent Temperature Changes: The Case of Peru", IMF Working Papers 2025, 144 (2025), accessed August 22, 2025, https://doi.org/10.5089/9798229017879.001

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Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

Peru is highly exposed to periodic El Niño Costero events, which impair production in the country’s fishing, agriculture, and construction sectors, as well as inflict sizeable damages to physical assets. Moreover, rising average temperatures are expected to diminish productivity in agriculture, fisheries, and energy. Without efforts to strengthen its adaptive capacity, the country remains highly vulnerable to such acute and chronic physical risks in the long term. This paper combines a Markov-switching DSGE model with empirical estimates of losses from such risks to conduct a scenario analysis of their macro-fiscal implications. We find that cumulative income losses could reach up to 18.6 percent by 2050 and 50.6 percent by 2100. The analysis further shows that scaling up investments in structural resilience and adaptation can partially mitigate these losses—raising output by up to 12.3 percent by 2050 and 31 percent by 2100—while also generating long-term fiscal savings.

Subject: Climate change, Environment, Natural disasters, Potential output, Production

Keywords: Acute physical risk, Anomaly in El Niño, Building macroeconomic resilience, Caribbean, Chronic physical risk, Climate change, El Niño, El Niño shock, Global, Investment needs, Natural disasters, Potential output, Scenario analysis, Structural resilience, Temperature anomaly, Weather shocks

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