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The Budget Directorate (Dipres) presented the Public Finance Report corresponding to the fourth quarter of 2020.
“The year 2020 we face the deepest economic crisis in our recent history. A 6% drop in Gross Domestic Product and the unemployment rate has risen to double-digit levels reaching 10.3%, that is, 920 thousand unemployed people “, maintained the distribution.
The consequences of this negative shock have also translated into “fiscal challenges”.
Central Government revenues for the year 2020 decreased by 8.4% while the Public Spending grew 11% in the same period.
“This is mainly explained by the 14.6% increase in current spending, which offset a drop in public investment that plummeted by 8.9%, as a result of the confinement and quarantine measures that displaced the development and / or startup of the projects, ”explained Dipres.
Matías Acevedo, Budget Director, commented that “without a doubt, no country, company and family have not been affected in any way by this crisis.”
“For the State it is no different: the deficit of the Cash Balance between income and expenses reached 7.4% of GDP, the highest figure that has been recorded since 1973 ″, he stated, highlighting the “important efforts that the Government has deployed” to alleviate the effects of this crisis economical.
“Government support measures have been highlighted by numerous international institutions such as the International Monetary Fund (IMF), the World Bank and recently the OECD, both for its opportunity and its audacity ”, Acevedo pointed out.
In terms of the Structural Balance, it is estimated that the 3.2% goal would have been met, registering a preliminary closing of 2.7% of GDP.
However, said Dipres, for the year 2021 “economic projections indicate a significant recovery “: a 5.0% growth, which considers an 8.8% expansion of Internal Demand, which will allow an improvement in the fiscal outlook compared to what was anticipated in the September 2020 report.
“This year we have defined it as a transition stage, where the extraordinary momentum to support the economic and employment recovery. (…) Access to vaccines, the quality and timeliness of the economic packages implemented, added to the country’s situation prior to the crisis, are the main factors that will determine the speed of recovery of the world’s economies, ”Acevedo said.
Budget Law
In November 2020, the Budget Law 2021 was approved, called the “Budget of Labor and Recovery of Chile”.
The main results of the budget discussion can be summarized in four points, the Dipres summarized:
1. The framework of understanding of the June 14 agreement was respected, closing the budget process with the spending framework with which the bill entered Congress.
2. An effort to evaluate programs and austerity materialized, where 1 out of every 6 pesos of the budget (variable expenditure), which in amount reaches USD 2,270 million, was reassigned to the most urgent citizen priorities.
3. In a context of lower economic activity, the budget was approved with the greatest fiscal impulse in Latin America (according to IMF).
4. Congress approved a budget with extraordinary resources for USD 5.5 billion established in a flexible fund, which allows mobilizing resources for direct transfers and / or investments depending on how the confinement restrictions are developed.
Finally, the director of Dipres remarked that “this year will be the year of the recovery of growth capacity and employment.”
“We must return with a sense of urgency to the virtuous circle of economic growth, recovery of the more than one million jobs destroyed and a level of tax collection that allows financing the important social agenda that Chileans need. (…) Fiscal and social responsibility do not compete, they go hand in hand (…) ”, concluded Acevedo.
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