For its part, the European Central Bank postponed the start of monetary normalization and announced new initiatives for liquidity provision. Chinese authorities have announced new fiscal and monetary packages in addition to those adopted during 2018. Nonetheless, global financial markets remain susceptible to potentially negative news, as reflected in the tensions at the end of 2018 and at the statistical close of this Report. Thus, there have been ups and downs in appetite for risk, capital flows and emerging currencies. The exchange rate in Chile has also been volatile. Considering the average of the ten days prior to the statistical closing, the real exchange rate (RER) is somewhat below its average of the last fifteen and twenty years. As a working assumption, the baseline scenario foresees that the RER will return to these levels during the projection horizon. The baseline scenario of the Monetary Policy Report states that during 2019 and 2020 the world economy will grow 3.3% and 3.2%, respectively, less than the 3.7% average of the two previous years and the December Report’s forecast (3.5% and 3.3%, respectively). Chile’s business partners will show the same expansion rates in that period (3.6% in 2017-2018). These projections assume that the US will grow at rates closer to 2%, gradually approaching trend growth. In the case of China, it is projected to grow 6.1% this year and 6% in 2020, less than in previous years and consistent with the process of achieving lower expansion rates as the economy grows in size.
The aggregate demand is also affected by the elevated growth rates of raw materials and component inventories. Firstly, companies make up for the drop in inventories incurred during the pandemic and as a result of disrupted logistical chains. Secondly, in light of the last year’s experience companies are seeking to accumulate more inventories to insure against possible disruptions in supplies, as well as further price increases. These processes concern a broad range of production chains rather than a narrow group of goods. The structure of demand is also changing, as a result of changes in people’s way of life due to the pandemic. Neither the sustainability nor the duration of this process is clear so far. Yet, it evidently creates bottlenecks on the supply side. For instance, massive work and study from home spurred a sharp increase in the need for telecommunications followed by a considerable increase in the demand for microchips. Online orders require much more packaging materials. A pick up in demand for real estate is in part associated with the desire to reach comfortable conditions for working from home. Wishing to support their economies, many countries are expanding infrastructure projects; all this also influences the increase in demand for construction materials and metals. It is still difficult for businesses to assess which part of the elevated demand is temporary and which — sustainable. They need time to make decisions about investing in new production facilities.