Expect robust growth in 2022
Main assumptions of our base scenario forecast:
* In coming years there will be no major political, social or institutional crisis, and there will be some degree of coordination between the government and Congress.
* Given the composition of Congress, there will be no major reforms, at least on the economic front. Nevertheless, there will be changes, legislative and otherwise, that will negatively affect potential GDP growth.
* Potential GDP growth will converge to 2%, but the long-run neutral interest rate will rise to 4.25%, due to less savings and more volatility.
* Considering the political context, we assume that COVID-related transfers will be at least partially substituted by other forms of household transfers. There will be no more pension withdrawals.
* The situation around the pandemic will continue to normalize, including in global supply chains.
* Terms of trade will remain favorable, global inflation will stabilize and international interest rates will continue to rise.
Of course, to the regular economic risks both at the global and the local level, we have to add an unusual political situation. Uncertainty is higher than usual. In March a new president who does not belong to any of the traditional political parties will take office. President-elect Gabriel Boric is both younger and further to the left than any president in decades. At the same time, a democratically-elected Constituent Assembly, dominated by the left, is writing a new Constitution.
Please see the report for our forecasts.
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