Expert estimates based on data from the IMF and the Central Bank.
With projections prior to the October crisis, the country was expected to reach the same level as Greece and Portugal in 2026 and 2030, respectively. Now, this goal could be extended until 2042. The social crisis of October last year added to the impact that the covid-19 pandemic is causing will have severe consequences on the Chilean economy.
Both crises will provoke a greater indebtedness of the State, lower income for the Treasury and less growth capacity for the next years, as a result of changes in the operation of different sectors. With this scenario, the prospects of reaching the income levels of developed countries will go to the ground. According to data from the International Monetary Fund (IMF) of October 2019, Chile was going to close that year with a GDP per capita of US $ 22 thousand, measured with the purchasing power of parity, according to the parameters of the fund. For that same year, Greece and Portugal – two of the developed countries with the lowest GDP per capita of that group, according to the fund – were expected to reach US $ 26,000 and US $ 29,000, respectively. Thus, given this panorama, Chile was expected to reach the 2019 level that the Greeks and the Portuguese had by 2026 and 2030, respectively.
However, this goal should be postponed. Based on IMF data, population growth projections, and new prospects for GDP growth for the Chilean economy, Clapes UC researcher Hermann González estimated that this goal will be postponed to 2034 in the case of Greece and to 2042 for Portugal.
The estimate considers a contraction of the economy of 6.5% this year – in the center of the Central Bank’s range – and growth of 5.5% for 2021, 3.5% in 2022, and from 2025 onwards a 2% increase, similar to current trend GDP.
“What this exercise does is that taking for the short term the midpoint of the growth projections of the Central Bank, calculates how long it would take Chile to reach the same levels of per capita income that Greece or Portugal had estimated for the year 2019. If Chile grows in the long term, after all this short-term noise passes, to 2%, then the convergence to GDP per capita of developed countries is postponed for 8 to 12 years, depending on the reference one takes,” explains González.
Thus, he adds, growing at rates greater than 2% reduces this period of convergence and, therefore, that makes it very important that, once all this is over, the interest of public policies in resuming economic growth is resumed.
Otherwise, adds González, what would happen is that the level of development of the economy is postponed and moves away from the horizon of improving per capita income, which, in the end, is an indicator of the population’s well-being.
“When we look at Greece or Portugal, we look at their per capita income, but as an indicator of well-being, of an economy that has lower levels of poverty, better levels of education, health, welfare, etc. So the only way to accelerate this stride is with greater economic growth, “says the economist.
A similar exercise was carried out by Tomás Flores, a senior economist at LyD. According to his estimates, Chile could reach the same level of GDP per capita as Greece until 2032. For Flores, this postponement of reaching the per capita of a developed country shows that there is a substantial decline in income, which will probably be notable in the indicators of poverty and income distribution.
“The only way to recover all these lost years, due to this crisis, is to achieve reforms that what they do is accelerate growth over the next 10 years. Otherwise, we are going to have to wait practically a decade to reach the goal that was considered for a few more years, “observes Flores.
Another impact that the pandemic has left in Chile is that the level of employed persons reaches 8.2 million, making the labor market fall in five years.
Experts foresee difficulties in closing project financing
In the energy sector, the impact has already been present with the contraction in consumption due to the lower mobility of people, an indicator that has been around 10% nationwide in recent weeks. SPEC Executive Director Carlos Suazo warns that this will postpone the expected increase in energy demand for tenders from regulated customers, but also, in the coming years there will be lower marginal costs than expected, so companies that do not have Contracts will be more affected. “For new projects to materialize, financing will be needed, and with the low marginal cost, it will be more complex to structure it,” says Suazo.
Along these lines, the executive director of Ecom Energía, Sebastián Novoa, points out that the great challenge for the industry will be for lower energy prices to reach smaller consumers, and thus support the economic recovery. “The inclusion of the energy marketer is imperative. For this, the distribution network must be converted into a physical space that it calls, into an enabling platform for conducting business, ”he says.
In the mining sector, the executive director of Plusmining, Juan Carlos Guajardo, anticipates that this crisis will accelerate the trend around productivity, automation and labor relations. “Facing production with fewer people has generated a kind of test of what that means for the mining operations, there is evidence of the impact on productivity, there is data on how it has changed, which may have consequences on company decisions ”, Indicates the expert. He also warns that the sector requires measures that point to a revaluation of investment as a tool to boost the economy, which so far has been addressed from the operational level, rather than political. The president of the Sonami, Diego Hernández, points out that it is essential to advance through artificial intelligence, which requires people with a sufficient level of skills. “For this, it is necessary that the workers know how to work as a team, they must have a high level of adaptability, be innovative, with extensive management of automation,” says Hernández.
Source: El Mercurio
Translated with Google Translator
