Recent developments of the Chilean Economy CEMLA-NY FED conference, July 2021
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Recent developments of the Chilean Economy
CEMLA-NY FED conference, July 2021
[INF*RES*AS]Chile´s vaccination program has progressed very favorably. This has contributed to lower
cases in recent weeks –especially, severe hospitalizations and deaths– leading to a
relaxation of restrictions in recent days.
Vaccinated population (1) Evolution of new cases
(percentage of population) (new cases per million people)
Two jabs At least one jab Eurozone (5) Latin America (6)
China (2) 1200 United States Chile
UK India
Chile
1000 Israel
UK
800
Israel
Eurozone (3) 600
United States 400
Latin America (4)
200
India
0
0 50 100 Jan.20 May.20 Sep.20 Jan.21 May.21
(1) Information up to June 7, 2021. (2) Corresponds to total doses (5) Includes Germany, Spain, France and Italy. (6) Includes Argentina, Peru,
administered as percentage of population. (3) Weighted average including Brazil, Mexico and Colombia. Source: Our World in Data.
Germany, Spain, France and Italy. (4) Weighted average including
[INF*RES*AS]
Argentina, Brazil, Colombia, Mexico and Peru. Source: Our World in Data.June MPR: significant upward revision in 2021´s growth forecast. Despite longer-lasting pandemic,
activity has rebounded (with inter-industry heterogeneity), reflecting three key factors.
First: better adaptation to operating under lockdowns (e.g., safety protocols; online sales)…
Monthly activity indicator, by industry
(seasonally-adjusted series; index, February 2020 = 100)
130
Mining Manufacturing Other goods Retail Services Total GDP
120
2020
110
100
90 -5.8%
80
2021 (f)
8.5-9.5%
70
Jan.20 Apr.20 Jul.20 Oct.20 Jan.21 Apr.21
Source: Central Bank of Chile.
[INF*RES*AS]Second: survival of firms. Preliminary evidence of scarring effects has been better than anticipated.
Special credit programs (CB liquidity + govt. guarantees) reached the most affected firms early in
the crisis. Availability of merged micro-data key for design and evaluation of these programs.
Credit growth (*)
(percent, categories according to sales performance)
18
16
14
12
10
8
6
4
2
0
Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 Aug-20
Large drop Moderate drop Unchanged Moderate increase Large increase
(*) 12-month growth in commercial loans each month, relative to February 2020. Groups of companies defined according to y/y sales growth, relative to February 2020. Large
drop/increase: changes between 20 and 100%; Moderate drop/increase: changes between 1 and 20%. No change: less than 1%. Proportion of firms in each category: large drop:
46%, moderate drop: 17%, no change: 3%; moderate increase: 13%, large increase: 21%. Source: XXX
[INF*RES*AS]Timely liquidity provision may have played a role in the bounce back of firm closures: for every
three that closed during 2020, two have restarted operations. Together with a pick-up in firm
creation, the number of operating firms ended 2020 slightly higher than in February 2020.
Decomposition of net firm entry, 2020*
400,000
300,000
200,000
100,000
0
-100,000
-200,000
-300,000
-400,000
Mar-20 Apr-20 May-20 Jun-20 Jul-20 Aug-20 Sep-20 Oct-20 Nov-20 Dec-20
New firms Closing firms (3+ months) Re-entry of closing firms RNA Net entry
*Net entry: difference between outstanding firms in each month, relative to Feb. 2020. Closing firms: firms that stop reporting positive sales for 3 or more
months, during 2020. Re-entry of closing firms: firms in the “Closing firms” group that recover positive sales during 2020. For further details, see Box V.1,
Monetary Policy Report, March 2021. Source: Central Bank of Chile calculations, based on form F29 of the IRS.
[INF*RES*AS]This recovery can also be traced to inter-firm linkages. After dropping more than 10% in the
worse months of the crisis, linkages have recovered almost all losses. This bodes well for the
discussion about bottlenecks and diminished productivity.
Creation and destruction of relationships with suppliers (*)
(annual change, %)
0.50 Creation Destruction Net creation (rt. axis) 0.00
0.45 -0.02
0.40
-0.04
0.35
-0.06
0.30
-0.08
0.25
0.20 -0.10
0.15 -0.12
01.20 03.20 05.20 07.20 09.20 11.20
(*) Documents gross creation and destruction (left axis) and the creation (right axis) of productive relationships of firms with their suppliers, expressed in year-on- year growth. Firms belonging
to the National Accounts Directory are included, except those linked to EGW and Public Administration. Red vertical line marks February 2020. Source: Central Bank of Chile based on digital
invoicing data.
[INF*RES*AS]Third: liquidity support to households has also been substantial –three pension withdrawals +
enhanced fiscal support add up to over 20% of GDP since 2020.Q3. High frequency data suggests
consumers are spending a significant portion (“3 Christmases” during last 12 months)
Liquidity support measures for households Retail sales (e-receipts) (1)
(US$ billion) (Jan.20=100, 28-day MA)
180 Current year 1 year ago 2 years ago
IFE Middle class subsidy
3rd AFP w/d benefit Unemp. ins. use
30 1st & 2nd. AFP w/d (2) 3rd AFP w/d (3) 160
Total
25
22.0 140
19.5 Total amount
20 ≈23% GDP 2021 (e)
120
15 12.9
11.9
100
10 6.7
80
5
Expenditure equivalent to “3 x-mases”
0 60
20.III 20.IV 21.I 21.II 21.III Jul.20 Sep.20 Nov.20 Jan.21 Mar.21 May.21
(1) Last daily data available: June 30, 2021. (2) 1st and 2nd AFP withdrawals correspond to amounts paid based on statistical bulletins from Superintendence of Pensions up to April 30, 2021. For 21.III the difference between
total amount estimated to be withdrawn and amount paid up to April 30, 2021 is considered. (3) 3rd AFP withdrawal: 21.II corresponds to amounts paid based on statistical bulletin from the Superintendence of Pensions up to
May 28, 2021 and 21.III corresponds to the difference between total amount estimated to be withdrawn and amount paid up to May 28, 2021. Sources: National Statistics Institute, Central Bank of Chile, Ministry of Finance and
Superintendence of Pensions.
[INF*RES*AS]The job market remains the key source of uncertainty, with signs of staling in recent data. However, it
could well be reflecting labor supply issues (e.g., significant liquidity, with lingering pandemic and safety
concerns).
Employment, by industry Inactivity and job postings
(index, February 2020 = 100) (index, January 2015=100; %)
Manufacturing Retail
Construction Contact-intensive services (1)
Other services (2) Total 100 Internet's job postings Index Inactivity (rt. axis) 8.0
110
7.5
100 80
90 7.0
80 60 6.5
88.7
70
6.0
60
40
50 5.5
40
20 5.0
Jan.19 Jul.19 Jan.20 Jul.20 Jan.21
Jan.19 Jul.19 Jan.20 Jul.20 Jan.21
(1) Includes accommodation, food services, arts, entertainment, and recreation Sources: Central Bank of Chile and National Statistics Institute (INE).
activities. (2) Includes financial and insurance; real estate; professional, scientific and
technical; administrative and support service activities; public administration and
defense; education; human health care and social work activities;
Source: National Statistics Institute (INE).
[INF*RES*AS]Inflation has increased close to 4%, in line with projections. We expect a temporary pickup due to strong
demand and international costs (shipping rates; commodities). Monetary policy normalization, as well as
dwindling fiscal support after 2022, should bring inflation towards the target at the 2-year horizon.
Inflation forecast (1)
(y-o-y, %)
5 IPC IPC subyacente (2) IPoM Jun.21 IPoM Jun.21 EEE EOF Seguros
forecast
4
3
2
20 21 22 23
(1) Inflation contracts updated untiil June 8, 2021.
Source: Central Bank of Chile and National Statistics Institute.
[INF*RES*AS]MPR corridor: MP communication reflects key changes to the outlook, bringing forward date of
normalization. Corridor borders constructed under alternative scenarios reflecting stronger or
weaker growth/inflation prospects. Confidence intervals constructed around Taylor Rule.
MPR corridor (%, *)
5.0 Corridor
66% confidence interval
4.5
33% confidence interval
4.0 FBS
EES
3.5
FWD stat. cutoff date June MP Report
3.0 Forward July 6
MPR
2.5
2.0
1.5
1.0
0.5
0.0
Jun.20 Sep.20 Dec.20 Mar.21 Jun.21 Sep.21 Dec.21 Mar.22 Jun.22 Sep.22 Dec.22 Mar.23 Jun.23
(*) The corridor is built following the methodology of Box V.1 of the March 2020 Report. It includes the FBS of June 3, the EES of May 11 and the quarter’s mean smoothed forward curve with
data of July 6. The methodology corresponds to the extraction of the implicit MPR considering the forward curve on the interest rate swap curve up to 2 years, discounting the fixed rates for
each term at the simple accrual of the ICP. Source: Central Bank of Chile.
[INF*RES*AS]Recent developments of the Chilean Economy
CEMLA-NY FED conference, July 2021
[INF*RES*AS]The data also allows to track several firm-specific characteristics. New entries during the pandemic do
not seem to depart markedly from previous years, in both the industry and firm-size dimensions.
Characteristics of new firms (*)
(percent of total new firms)
(a) By economic sector (b) By size
Nat. resources and utilities Business and financial services Sales of over 100,000 UFs
Other Manufacturing industry Medium-sized: sales between 25,000 and 100,000 Ufs
Construction Trade Sales between 2,400 and 25,000 Ufs
Transport, info and comm. Restaurants & hotels Sales below 2,400 UF.
100 100
75 75
50 50
25 25
0 0
Historical 2015-2018 2020 Historical 2015-2018 2020
(*) Panel a: Percentage share of each sector in the distribution of entrant firms. Panel b: Percentage share of each stratum in the distribution of entrant firms. Source: Central Bank of Chile
based on form F29 of the Internal Revenue Service (SII).
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