Itaú BBA - Using policy buffers

Scenario Review - Chile

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Using policy buffers

Maio 11, 2020

The reduced global demand, mobility restrictions and lingering domestic uncertainties led us to reduce our GDP forecast to a 3.7% activity contraction.


For the full version with all charts and tables, please open the attached pdf file

 

• Social distancing measures underway to confront the novel coronavirus will have a significant impact on activity, while higher unemployment, a deterioration of private sector balance sheets and persisting health concerns could mean the expected recovery underwhelms. 

• We now expect a 3.7% GDP contraction this year. The central bank will continue to reiterate its low-for-long rates message (we see rates at 0.5% throughout the year), while remaining ready to upscale its QE and liquidity measures if the economic distress escalates. As fiscal authorities raise spending and ease taxes to soften the blow from the global shock, debt metrics will deteriorate more rapidly and raise the risk of a ratings downgrade in coming months (but to still-high rating levels).

 

João Pedro Bumachar
Vittorio Peretti
Miguel Ricaurte

 

For the full version with all charts and tables, please open the attached pdf file



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