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In the month of August, the IMF adhered to the pessimistic projections for our country, being the only one in the region with a fall in its GDP in 2023, projecting that our economy will fall by 1%.

For this 2022, the IMF expects the economy to expand by 2%. The forecast for 2023 adds to that set forth by the World Bank, which also anticipated that Chile would record the lowest growth figures in Latin America. On the other hand, the Fund projects that the GDP of Latin America would grow 3.5% this year, while in 2023 the expansion would be 1.7%. Specifically for Chile, whose CPI stood at 13.7% in annual terms in September, inflation would end the year at 11.4%. While in 2023 it would be at 8.7% per year, still very far from the 3% goal with which the Central Bank of Chile works.

In the first half of October, the Central Bank again raised borrowing costs by 0.5%, reaching 11.25%, the smallest increase since the beginning of its strategy to contain inflation, this would be justified, because the demand of local consumers decreases and, annual inflation would begin to decrease from a historical maximum observed in the last 30 years. Let us remember that annual inflation slowed in September, reaching 13.7% from a maximum of 14.1% the previous month, the first decrease since the beginning of 2021. “Price increases will moderate even more,” said the minister. Treasury, Mario Marcel. However, you must be cautious and not lower your guard, it shows only one button, let’s see what has happened with the price of the dollar. Chile, being a country that imports a large number of products consumed by the population, is exposed to inflationary pressures via the exchange rate. The peso, compared to the dollar, has fallen around 5% since the previous meeting of the Central Bank where it announced its rate decision for the month of September (10.75%).

What awaits us in 2023 as a country in economic terms? One should be very careful about how the recession projected by multiple agents is going to interact with inflation, the above because it is expected that inflationary pressures will decrease to historical levels, it is not a certain fact yet, what is more, it is very unlikely that it will occurs by 2023. If high inflation continues to be observed, the Central Bank would find it difficult to combat it without deepening the negative effects on the local economy. And, in this case, a contractionary monetary policy with an expansionary fiscal one is not optimal either. Let us recognize, yes, that a good targeting by the government could lessen this. During 2022, and largely explained by the variation in the CPI, people’s real wages have fallen more than the variation in prices, in other words, not only have prices risen, but we are poorer. The only way to reverse this is by controlling inflation. Today in retrospect we see the damage that the policy of withdrawing funds from the AFPs has caused us. It is clear that many families needed liquidity during the pandemic period (many others did not) and today we pay that price as a country. We should think that since we all agree with phrases such as “grow with equity” or “grow with equality”, if we are poorer, these goals will be further and further away. Chile has historically been characterized by being, in general, a country organized in economic aspects, with a long-term vision. Now we have no choice but to return to that path with only one clear objective: to reduce poverty and give our fellow citizens the growth with equality and equity that they deserve.

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J. A. Allen

Author, blogger, freelance writer. Hater of spiders. Drinker of wine. Mother of hellions.

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