These are summarized in the Report’s box V.1. Also, this time around, we have attached to the Report a supplement describing a body of background information on the determinants of and perspectives for Chile’s trend growth over the next 30 years. I will come back to the contents of this document in a few minutes. Our estimates suggest that Chile's trend GDP growth over the next ten years is in the range of 3% to 3.5%, quite comparable to our estimates a year ago. This range implies, among other things, that investment again grows in line with GDP; that the productivity of sectors other than natural resources grows near its average of the last 20 years; and that immigration and increasing female participation partially offset the effects of the aging population on the labor force. With regard to potential growth, at the shortest terms, investment and productivity show below-trend growth rates, so potential growth is lower than trend. Thus, potential GDP growth is now estimated to be around 2.5%, compared to the 2.5% to 3.0% we estimated in September 2016. With this, the current activity gap is somewhat narrower than previously estimated, even considering that the evolution of GDP has also been somewhat lower (figure 9). For the purposes of monetary policy, the evolution of the activity gap is still consistent with an economy needing an important monetary impulse throughout the 4  projection horizon. In addition, the Board continues to estimate the neutral interest rate to be between 1% and 1.5% in real terms.
Indeed, the data show that, beyond the difficulty of calculating productivity by sector, the negative effect of the decline of mining ore has taking its toll on this industry (figure 12). The evidence from Chile suggests that there are important inefficiencies in resource allocation across firms and that there would be first order gains from measures aimed at improving them, which, unlike the case of human capital, could generate gains sooner. To back this last analysis, the document provides some international comparisons on productivity, microeconomic evidence on how the productivity of firms evolves, and its degree of dispersion. In particular, from a comparative perspective, although Chile's productivity appears to be aligned with its GDP per capita, it is about 60% that of the United States and less than that of the richer OECD countries, which implies that there is great room for improvement (figure 13). In Chile, as in many other economies, there appear to be significant gains from fostering a better allocation of productive resources, helping the more efficient firms to grow and the less efficient to shrink and eventually exit the market. As can be seen in table 3, 9  resource reallocation is an important source of TFP growth. For this, it is essential to have flexible labor markets that allow adjusting the endowment of companies when necessary, developing the financial system to direct resources to where the good ideas are and implement rules that facilitate the creation and dissolution of companies.