Presentación UCL

R O D R I G O VA L D É S P U L I D O
MINISTER OF FINANCE OF CHILE
Chilean Economy:
Sailing in a Volatile World
London, September 7th 2015
University College of London
MINISTRY OF FINANCE. GOVERNMENT OF CHILE
Outline
1. Overview
1. Macroeconomic Framework
2. Chilean Economic Adjustment
3. Challenges
MINISTERIO DE HACIENDA . GOBIERNO DE CHILE
1. Overview
MINISTRY OF FINANCE. GOVERNMENT OF CHILE
CHILE AT A GLANCE
Total surface area1 (sq. km)
Population (million people)
1990
2014
756,626
13.2
17.8
GDP (US$ billion)
GDP per capita PPP (US$)
GDP Growth
GDP Growth forecast 2015
32.6
5,847
3.4%
-
258.2
22,971
1.9%
2.5%
Poverty (% of population)
Gini coefficiente
38.6
0.56
14.4 (1)
0.49 (1)
(1) Data for 2013.
Source: Central Bank, IMF, National Statistic Office and Ministry of Social Development.
MINISTERIO DE HACIENDA . GOBIERNO DE CHILE
Chile is a small and ….
2015 GDP
(US$ PPP)
Source: Worldmapper.
MINISTERIO DE HACIENDA . GOBIERNO DE CHILE
…. open economy
(Export+Import)/GDP=55%
Most Favored Nation Tariff, (%)
Chile
Chile, effective tariff
0
Source: UNCTAD
10
20
30
40
MINISTERIO DE HACIENDA . GOBIERNO DE CHILE
Highly dependent on natural resources, and….
Exports, 2013
(composition, %)
Source: Atlas of Economic Complexity, Harvard.
MINISTERIO DE HACIENDA . GOBIERNO DE CHILE
…vulnerable to external shocks
GDP Growth and External Conditions (1)
(annual % variation, % PIB)
20%
GDP growth
External Conditions Index, detrended
15%
10%
5%
0%
-5%
-10%
-15%
1980 1984 1988 1992 1996 2000 2004 2008 2012
(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.
MINISTERIO DE HACIENDA . GOBIERNO DE CHILE
Even though, Chile has managed to “converge” in
the last years
GDP per capita PPP, 1990 dollars
(developed countries = 100)
120%
120%
100%
100%
80%
80%
60%
60%
40%
40%
20%
20%
%
ARG
CHI
BRA
KOR
0%
0%
1950-59 1960-69 1970-79 1980-89 1990-99 2000-09 2010-14
Source: IMF and Madison.
MINISTERIO DE HACIENDA . GOBIERNO DE CHILE
2. Macroeconomic Framework
MINISTERIO DE HACIENDA . GOBIERNO DE CHILE
Credible Central Bank
Inflation
(% y-o-y variation)
30
30
25
25
20
20
Inflation target
15
10
15
Headline
inflation
Inflation
expectations 10
5
5
0
0
-5
-5
1991 1994 1997 2000 2003 2006 2009 2012 2015
Source: Central Bank.
MINISTERIO DE HACIENDA . GOBIERNO DE CHILE
Responsible Fiscal Policy
Fiscal Balance
(% GDP)
20
10
8
Assets and Debt of Central
Government, (% GDP)
Nominal
Structural
Sovereign Funds
18
Central Government Gross Debt
16
6
14
4
12
2
10
0
8
-2
6
4
-4
2
-6
2000 2002 2004 2006 2008 2010 2012 2014
Source: Ministry of Finance
0
2000
2002
2004
2006
2008
2010
2012
2014
MINISTERIO DE HACIENDA . GOBIERNO DE CHILE
3. Chilean Economic Adjustment
MINISTERIO DE HACIENDA . GOBIERNO DE CHILE
Copper price “super cycle” is ending
Real Copper price
(cUS$ per pound, 2014 )
700
600
500
400
300
200
100
0
1870
1890
1910
1930
Source: Catholic University of Chile, Central Bank and LME.
1950
1970
1990
2010
MINISTERIO DE HACIENDA . GOBIERNO DE CHILE
Resources have to be
reallocated!
MINISTERIO DE HACIENDA . GOBIERNO DE CHILE
Salter-Swan Model
Chile 2003-2004: internal and external balance
Non tradables
CNT0=YNT0
P=C
CTnc0= YTnc0
Tradables non copper
MINISTERIO DE HACIENDA . GOBIERNO DE CHILE
Salter-Swan Model
Chile 2004-2008, copper boom
Non tradables
CNT1
YNT0
YTnc0
CTnc1
Tradables non copper
MINISTERIO DE HACIENDA . GOBIERNO DE CHILE
Salter-Swan Model
Chile 2004-2008, copper boom
Non tradables
Tradables non copper
MINISTERIO DE HACIENDA . GOBIERNO DE CHILE
Salter-Swan Model
Chile 2004-2008, copper boom
Non tradables
CNT2=YNT2
YTnc2
CTnc2
Tradables non copper
MINISTERIO DE HACIENDA . GOBIERNO DE CHILE
Salter-Swan Model
Chile 2013-2015, negative term of trade shock
Non tradables
YNT3
CNT3
YTnc3= CTnc3
Tradables non copper
MINISTERIO DE HACIENDA . GOBIERNO DE CHILE
Salter-Swan Model
Chile 2013-2015, negative term of trade shock
Non tradables
Tradables non copper
MINISTERIO DE HACIENDA . GOBIERNO DE CHILE
Salter-Swan Model
Chile: medium term
Non tradables
CNT0=YNT0
P=C
CTnc0= YTnc0
Tradables non copper
MINISTERIO DE HACIENDA . GOBIERNO DE CHILE
Fiscal Balance and Current Account
Fiscal Balance and Copper Price(*)
(% GDP, US$ per pound)
Current Account and Copper Price (*)
(% GDP, US$ per pound)
6
5
8
5
6
4
4
2
3
0
4
4
2
3
0
2
2
-2
-2
1
-4
-6
0
1
-4
-6
2003 2005 2007 2009 2011 2013 2015(p)
Current account
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
0
2003 2005 2007 2009 2011 2013 2015(p)
Fiscal Balance
Real copper price (right scale)
23
MINISTERIO DE HACIENDA . GOBIERNO DE CHILE
Tradable sector shrank over the years
Tradable sector participation in total GDP
(percentage)
2003
2014
24.8%
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.
MINISTERIO DE HACIENDA . GOBIERNO DE CHILE
4. Challenges
MINISTERIO DE HACIENDA . GOBIERNO DE CHILE
Economic policies has to ease the reallocation
 Flexible exchange rate
 Credible and monetary policy
 Gradual adjustment of fiscal accounts
MINISTERIO DE HACIENDA . GOBIERNO DE CHILE
Economic policies has to ease the reallocation
 Support resources mobility
 Support private confidence
R O D R I G O VA L D É S P U L I D O
MINISTER OF FINANCE OF CHILE
Thanks
London, September 7th 2015
University College of London