After months of negative numbers, Chile’s economy is “good and improving” and showing signs of being on the road to recovery. This is one of the conclusions of a recent report by the UNAB Institute of Public Policies’ Barometer of the Chilean Economy.
The report revealed that in the eighth month of the year, five of the twenty indicators covered by it had four-quarter changes, all in a positive direction. Although there are still variables that have not reached pre-pandemic values, the local economy is on the road to recovery.
In August, the “good and improving” portion of the barometer, the most positive, accounted for 35% of variables, up 10 percentage points from the previous month, the report showed, bringing together the real wages index, mortgage lending rate and amortization. Creditors, copper prices, country risk, IPSA and the gender gap in labor force participation.
20% of indicators are positioned in the “good, but getting worse” binary, which is equivalent to a drop of 10 points compared to July. Here labor force participation, foreign direct investment, economic uncertainty and central government net debt were located.
Another 35% of indicators are located in the “worse, but improving” zone, which corresponds to an increase of 15 points compared to the previous month, concentrating on unemployment, inflation, IMACEC, business confidence, consumer confidence, job creation and savings. In current accounts and time deposits.
Finally, 10% of the variables, in this case the dollar and exports, are in the “worse and worsening” region, indicating a drop of 15 percent of the variables in this quadrant compared to July.
“The good news is that 70% of the barometer variables are improving, a scenario that consolidates a recovery we began to observe last month. We’re getting closer to a normal situation, so almost four years on is a good time to look back and reflect on the consequences of reckless policies like withdrawal.” said Gonzalo Valdes, Deputy Director of the UNAB Institute of Public Policies.
IMACEC, business confidence, consumer confidence, defaulters and copper prices showed positive changes in August, according to the Unab report. In fact, Imacec said, business confidence and consumer confidence have gone from “worse and getting worse” to “worse but improving”.
Creditors and copper prices went from “good, but getting worse” to “good and improving”. In the first case, 20,000 people stopped being creditor from April to May this year, while copper was at US$3.79 per pound, the same as on the same day in July. .
The report also examined other indicators that, although they did not change quadrants in August, updated their values in this edition.
Among the “good and improving” four, real wage index, mortgage lending ratio, IPSA and gender gap in labor force participation are maintained. What stands out is what happened to the real wages index, which posted a 2.5% change over the twelve months due to low inflation, which allows households’ purchasing power to not continue to deteriorate.
Labor force participation, foreign direct investment, economic uncertainty, and federal net debt reappear in “good, but getting worse.” Labor force participation shows 1,270 more people participating in the labor market, driven by an increase in female participation and a fall in male participation. Foreign direct investment is also among the top four, reaching US$ 1,937 million into the country, US$ 806 million more than what was reported in May.
The “worst, but improving” four include unemployment, inflation, job creation, savings in checking accounts, and time deposits. In this area, unemployment stands out first, reaching a rate of 8.5%. Inflation eased between June and July.
Finally, the “bad and getting worse” dollar and exports remain among the most negative quartiles.
“We note with concern the weakness of variables in the foreign sector, especially the dollar and exports. We cannot fail to remember that the international situation is complex, with the Ukraine war, the tense relationship between China and the United States and the problem of the Chinese real estate sector creating uncertainty. In this sense, the diversification of exports is important for Chile’s economic development. should be a policy priority,” added Valdez.
