Fynsa
This week, we saw a series of reports that identified Chile as the only economy in the region that would not show growth in 2023. Other international organizations have made similar statements, which has sparked a wave of criticism and finger-pointing. Without wishing to downplay the importance of growth—especially in a small economy like ours—I believe that discussion is somewhat pointless and causes us to lose sight of what really matters.
First of all, it’s worth noting that the projections placing Chile in a recession next year are not new. For some time now, the market—including the author of this column—has been publishing macroeconomic scenarios in which the economy would contract in 2023. At the same time, the Central Bank of Chile has been issuing a couple of IPoMs warning of the same thing, while the Ministry of Finance, through the Budget Office, has also foreshadowed this in its most recent Public Finance Report. Therefore, even though international organizations have mentioned this in their latest reports, there is nothing new here.
Second, assigning blame should be confined to the political debate and should not spill over into technical or economic discussions, since we understand the conditions that gave rise to the imbalances we face today, who was responsible for them, and what their motivations were. I would emphasize that, regardless of political stance, a large majority understands that adjustments must be made to correct those imbalances and that many of them could be painful. Some institutional framework remains.
Third, we keep forgetting that once those imbalances are resolved, our economy’s growth potential is very low. This is what is known as trend GDP, an estimate that economists use to measure a country’s productive capacity assuming that all resources are fully utilized and all other macroeconomic variables are at their long-run levels. Factors such as education, improvements in production processes, the availability of infrastructure and favorable conditions for doing business, legal certainty, and a widely accepted social contract are necessary conditions for increasing that growth potential. Therefore, even if we implement numerous policies that promote short-term growth, if this is not accompanied by a similar or greater increase in long-term growth, it will unfortunately end up creating imbalances and painful adjustments for the population, especially for the most vulnerable.
Therefore, it is urgent that we prioritize the discussion of how to increase our capacity for growth. Of course, this should not be done haphazardly; ultimately, it is society that defines the conditions under which that growth should take place: environmentally friendly, inclusive, equitable, or whatever conditions are desired—but if we continue to get bogged down in short-term debates, the pursuit of all these goals will be in vain.
