Structural parameters As we said in September, in this Report we updated our estimation of the structural parameters used in our medium-term projections. The new estimate covers trend growth and the neutral interest rate. It is important to note that trend growth is related to the medium-term growth capacity of the economy. Therefore, when we estimate it, we refer to a long period of time, usually a decade. The Bank also constantly estimates potential growth, which is a different concept, more closely associated with the evolution of the economy's short-term productive capacity. In any case, in the medium term, the two variables —trend and potential growth— converge. We estimate that for the period 2023-2032 the trend growth of non-mining GDP will average 2.2%, following the same declining trend that we anticipated in our June 2021 estimate. At that time, we projected that trend growth would average 2.9%, although the baseline period was different: 2021-2030. The main difference with the previous projection is that in the shorter term it factored in a recovery in hours worked and labor participation rate after the Covid shock. In the current estimate, which starts in 2023, these variables have already made most of their recovery. Thus, in the next few years, they will no longer contribute as importantly to trend growth. Towards the end of the period, the convergence of hours worked to the OECD average becomes more important, which will gradually reduce the contribution of the labor factor.
Low growth in total factor productivity continues to be expected, which is supported by its consolidation of a downward trend (figure 12). Our neutral MPR estimate puts it at 3.75%, within a range between 3.5% and 4%, equivalent to a 25 basis points increase from our previous estimate. This hike is consistent with the recent reversal of neutral rates in other economies, which reversed the downward trend of global rates. 5  Our projections In the central scenario, headline inflation is projected to keep declining in the coming quarters, converging to the 3% target in the second half of 2024. Core inflation will decline somewhat more slowly, reaching 3% by the end of 2024. The trajectory we are forecasting for inflation is somewhat above our estimate in the last MP Report. By the end of this year, with the information available on 30 November, we projected annual inflation of 12.3% (12% in September). For 2023, we project headline inflation to average 6.6%, ending the year at 3.6% (6.1% and 3.3%, respectively, in September) (figure 13). This revision considers the surprise accumulated in recent months and a slower decline in the real exchange rate over the projection horizon. The real exchange rate will hover around its current levels for a few quarters, contributing to the adjustment of macro imbalances, and then will begin to decline, in line with the evolution of the economy and its fundamentals towards long-term stability. The convergence of inflation continues to rely on the economy continuing to adjust.