Fynsa
It is natural for us to associate red numbers with bad news, as they generally show losses, declines or worsening. However, there are certain opportunities where a red number is not necessarily negative.
The variation in economic activity in December is proof of this. In a normal context, a drop of 1.0% compared to the same period of the previous year would be received with pessimism, but this time, the variation surprised private analysts and even the government positively.. This was because, for some months, it had been projected that the December Imacec would fall by over 3.0% YoY, following the trend of deceleration of the aggregate indicator, but also of each of its components. However, this did not happen. Not only did the aggregate did not decline as expected in the year-on-year comparison, but, at the margin, activity grew when the seasonally adjusted comparison is made. Along the same lines, services, trade and manufacturing activity increased.
Pending confirmation of these figures when the 2022 national accounts are published, which will occur on March 20, GDP would have grown 2.7% during the period, more than expected by the market, the Central Bank and even the Ministry of Finance itself. But that is history. Important, interesting, but the questions now focus on what could be the performance of 2023, which is expected to be much less dynamic. Hoday, projections are mostly between -3% and -1%, with even the International Monetary Fund mentioning that Chile would be the only economy in the region to show a decline. Again, be careful how we assess these comments.
Taking into consideration the scenario described in the last IPoM, Chile should show a fall in GDP between -1.75% and -0.75% in 2023. I do not think we can say that the authors of this document are catastrophists. However, it is good to remember why the economy is in this period of deceleration. The economic aid in the context of the pandemic, the withdrawals from pension funds and the global inflationary scenario caused significant macroeconomic imbalances, which, if not corrected, could have very negative repercussions on the welfare of families. In this context, both fiscal and monetary policy applied measures to resolve these imbalances, which meant a significant adjustment in spending during the year that just ended, together with a TPM that reached its highest levels since the subprime crisis..
Both measures have been working, but there is still some way to go. This means that the adjustment will continue and a reduction in domestic demand is a necessary condition to reduce inflation and bring the current account deficit to more sustainable levels. Hence, a negative cycle that will take the country into a recession. Not one like the one we saw during the pandemic, but a much milder one. Again, a data that we might usually consider as negative, is necessary to get back to macro order so we can worry about more long term things, such as our ability to grow in a sustainable and more productive way.
