MONETARY POLICY REPORT PRESENTATION BEFORE THE FINANCE COMMITTEE OF THE HONORABLE SENATE OF THE REPUBLIC  Mario Marcel Governor Central Bank of Chile 1 April 2020    The Monetary Policy Report of March 2020 can be visited at http://www.bcentral.cl. 1. Introduction Mr President of the Senate’s Finance Committee, Senator Jorge Pizarro; Senators members of the Committee, ladies, gentlemen, Thank you for your invitation to the Board of the Central Bank of Chile (CBC) to present our view on recent macroeconomic developments, its outlook and implications for monetary policy. This Monetary Policy Report is seeing the light in unprecedented circumstances, both because of the worldwide sanitary emergency and because of the economic consequences of the policy responses to stop the spread of COVID-19 in many countries. Unprecedented also because the need to restrict social contact has prevented us from presenting this Report normally instead of by this remote connection. The Monetary Policy Report we released this morning shows the dramatic change in the economic scenario that our country and the entire world are confronting. The global spread of COVID-19, the measures that have been adopted to contain it and the uncertainty about its reach have been reflected in plummeting stock markets and asset prices around the world, triggering a global economic recession in 2020. Chile will also feel this contractionary impact: in the baseline scenario that I will share with you in a few moments, we project that the Chilean economy will contract between 1.5% and 2.5% this year.
This is less than the estimates of the Organisation for Economic Co-operation and Development and the International Monetary Fund for world activity, which can be explained by the differences in the structure of the economy and the strictness of the measures considered. 2 “Indicador Mensual de la Actividad Económica” (IMACEC)—monthly indicator of economic activity. 4  The baseline scenario assumes that in the third quarter of this year the sanitary restrictions will begin to be eased and the economy will start its recovery process. Although this will not avoid a contraction in annual terms in that period, it will be the turning point for a significant rebound of year-on-year growth rates in the fourth quarter of 2020 and all of 2021. This vision is consistent with expectations for the rest of the world next year, when the United States will regain growth a little above 3% and China will approach 7%, thus driving world and trading partners growth of more than 3.5%. Towards 2022, both Chile and the rest of the world will again see expansion in line with their medium-term growth rates. In addition to overcoming the sanitary emergency, the expected recovery relies on the premise that most companies and individuals will be able to resume their activities as the spread of the virus is controlled, which depends on whether the financing needs of these agents can be met.