The year 2021 will probably be remembered as the year with the highest growth in our history. Well, at least since we have data. The Central Bank, the Treasury, the IMF, the OECD, the market and, of course, Fynsa, project that the GDP will expand by no less than 12% in real terms in the year that is about to end. On top of that, our country will be the country that will grow the most, read well, in the world.

The reasons for this expansion are well known. Firstly, the greater liquidity of households and companies has played a fundamental role: withdrawals from pension funds, direct transfers from the state, financing programs for SMEs, etc. In addition, the tremendous progress made in the vaccination process, which according to The Economist has made our country the best-prepared to face the omicron variant, has made it possible to accelerate the process of deconfinement of the population, increase the supply of available services and allow the recovery of those sectors that are lagging behind. Last but not least, we must remember that we are comparing ourselves with 2020, a year in which we are experiencing a strong recession, therefore, the base is not very demanding.

Thus, in the run-up to 2022, we must prepare ourselves for a return to reality. A return that, even if we do not like it, will most likely be violent and will cause an abrupt adjustment in our economy. As we learned during the week, in the Central Bank's macro scenario update, the IPoM projections incorporate a growth between 1.5% and 2.5% for the year that is about to begin and of only 0% - 1% towards 2023. Private consumption will no longer have the impulse brought by policies such as the universal IFE or withdrawals from pension funds, and public spending will enter fully into a process of fiscal consolidation after the important efforts made in the last two years. Investment, on the other hand, in an environment of uncertainty, would be very weak and only partially supported by some mining projects and renewal of machinery and equipment, which will not be compensated by public investment. The external impulse will be lower than in 2021, although imports will also be lower. 

Inflation will remain high, albeit declining, which would put the TPM in contractionary territory. Thus, both monetary and fiscal policy will not be present for countercyclicality, showing us that, after the holidays, all bills are paid and the hangover is directly proportional. But, more importantly, this slowdown will allow us to see, once again, what is the reality of the country's long-term growth possibilities. For various reasons, under governments of all colors, productivity improvement policies have been absent from the discussion and have rather focused on instrumentalizing some determinants with electoral and political motives. That is why it is projected that we are going to grow so little compared to our history. However, we are facing a great opportunity: a new government could make productivity one of its primary objectives, since higher growth, especially in the long term, is directly related to improved welfare, with higher tax collection, more permanent social policies, less inequality, better pensions (independent of the system), etc. Likewise, if this is encouraged in the draft of the new constitution, it will allow for continuity in its improvement and not depend on the political cycle. Continuing to think in the short term will lead us nowhere, only to more and worse hangovers.

Nathan Pincheira

Chief Economist, FYNSA