Chilean Economy: Sailing in a Volatile World

Transcription

1 R O D R I G O V A L D É S P U L I D O M I N I S T E R O F F I N A N C E O F C H I L E Chilean Economy: Sailing in a Volatile World London, September 7th 2015 University College of London

2 M I N I S T R Y O F F I N A N C E. G O V E R N M E N T O F C H I L E Outline 1. Overview 1. Macroeconomic Framework 2. Chilean Economic Adjustment 3. Challenges

3 1. Overview

4 M I N I S T R Y O F F I N A N C E. G O V E R N M E N T O F C H I L E CHILE AT A GLANCE Total surface area 1 (sq. km) 756,626 Population (million people) GDP (US$ billion) GDP per capita PPP (US$) 5,847 22,971 GDP Growth 3.4% 1.9% GDP Growth forecast % Poverty (% of population) (1) Gini coefficiente (1) (1) Data for Source: Central Bank, IMF, National Statistic Office and Ministry of Social Development.

5 Chile is a small and GDP (US$ PPP) Source: Worldmapper.

6 . open economy (Export+Import)/GDP=55% Most Favored Nation Tariff, (%) Chile Source: UNCTAD Chile, effective tariff

7 Highly dependent on natural resources, and. Exports, 2013 (composition, %) Source: Atlas of Economic Complexity, Harvard.

8 vulnerable to external shocks GDP Growth and External Conditions (1) (annual % variation, % PIB) 20% 15% GDP growth External Conditions Index, detrended 10% 5% 0% -5% -10% -15% (1) External condition index measures the effects of term of trade and capital inflow shocks on the GDP. Source: Central Bank,IMF and Ministry of Finance.

9 Even though, Chile has managed to converge in the last years GDP per capita PPP, 1990 dollars (developed countries = 100) 120% % 100% 120% 100% 80% 80% 60% 60% 40% 40% 20% 0% ARG CHI BRA KOR % 0% Source: IMF and Madison.

10 2. Macroeconomic Framework

11 Credible Central Bank Inflation (% y-o-y variation) Inflation target Headline inflation Inflation expectations Source: Central Bank.

12 Responsible Fiscal Policy Fiscal Balance (% GDP) Assets and Debt of Central Government, (% GDP) Nominal Structural Sovereign Funds Central Government Gross Debt Source: Ministry of Finance

13 3. Chilean Economic Adjustment

14 Copper price super cycle is ending 700 Real Copper price (cus$ per pound, 2014 ) Source: Catholic University of Chile, Central Bank and LME.

15 Resources have to be reallocated!

16 Salter-Swan Model Chile : internal and external balance Non tradables CNT 0 =YNT 0 P=C CTnc 0 = YTnc 0 Tradables non copper

17 Salter-Swan Model Chile , copper boom Non tradables CNT 1 YNT 0 YTnc 0 CTnc 1 Tradables non copper

18 Salter-Swan Model Chile , copper boom Non tradables Tradables non copper

19 Salter-Swan Model Chile , copper boom Non tradables CNT 2 =YNT 2 YTnc 2 CTnc 2 Tradables non copper

20 Salter-Swan Model Chile , negative term of trade shock Non tradables YNT 3 CNT 3 YTnc 3 = CTnc 3 Tradables non copper

21 Salter-Swan Model Chile , negative term of trade shock Non tradables Tradables non copper

22 Salter-Swan Model Chile: medium term Non tradables CNT 0 =YNT 0 P=C CTnc 0 = YTnc 0 Tradables non copper

23 Fiscal Balance and Current Account Current Account and Copper Price (*) (% GDP, US$ per pound) Fiscal Balance and Copper Price(*) (% GDP, US$ per pound) (p) Current account Real copper price (right scale) (p) Fiscal Balance Real copper price (right scale) (*) Nominal copper price deflacted by the industrial PPI of US (2014=100). (f) forecast Source: Central Bank of Chile and Budget Office of Chile 23

24 Tradable sector shrank over the years Tradable sector participation in total GDP (percentage) % 33.8% 66.2% 75.2% Tradable Non Tradable Tradables: Agriculture, Fishery, Mining and Manufactures; Non Tradables: Utilities, Services and Public Administration Source: Central Bank of Chile.

25 4. Challenges

26 Economic policies has to ease the reallocation Flexible exchange rate Credible and monetary policy Gradual adjustment of fiscal accounts

27 Economic policies has to ease the reallocation Support resources mobility Support private confidence

28 R O D R I G O V A L D É S P U L I D O M I N I S T E R O F F I N A N C E O F C H I L E Thanks London, September 7th 2015 University College of London