According to the Central Bank, GDP will fall between -1.75 and -0.75% in 2023 and will increase between 2 and 3% in 2024. Inflation would return to its target (3%) in 2024.
This Wednesday the Central Bank published the latest Monetary Policy Report (IPoM) of the year. He stressed that the country’s economy continues to undergo adjustments and that the inflation it continues to be very high despite the moderation it showed for two months (September and October).
He also pointed out that various factors have contributed to “widen the current account deficit”: During the third quarter of 2022, the current account registered a deficit of US$9,428 million, explained by the negative balance of the trade balance of goods and services and by income from foreign investment in Chile.
The deficit is significant: 6.6% of GDP in 2021 and 9.9% of GDP —accumulated in twelve months— in the third quarter of 2022. This latest figure is the highest in several years.
The current account balance is the difference between national savings and investment, or between national income and domestic demand. If national savings are not enough to finance investment, or if internal demand exceeds national income, external savings are required to finance the difference. That is, a current account deficit.
What the last IPoM of the year 2022 says
This latest report highlighted that the Chilean economy continues its adjustment process after the significant imbalances that accumulated during 2021.
On center stage, It is still projected that activity will have several quarters of contraction. The activity gap will turn negative towards the beginning of 2023, remaining at these values until the end of the policy horizon, which is “necessary for the convergence of inflation to the target.”
GDP will grow 2.4% in 2022, fall between -1.75 and -0.75% in 2023 and increase between 2 and 3% in 2024.
The inflation The annual peak reached its peak in the third quarter. It is expected to decrease in 2023, returning to the 3% target during 2024.
Private consumption continued to contract after the strong increases it showed in 2021. The investmenton the other hand, surprised the rise in the third quarter, concentrated in specific sectors, such as renewable energy, indicated the issuing institute.
All of this “contributed to widening the current account deficit,” he added.
Finally, the Central Bank reiterated that the global economic landscape is complexgiven the high persistence of global inflation and the rate hikes of the main central banks.