Furthermore, incoming data suggest that it will take longer than expected to recover. This, coupled with recent events that have considerably eroded mining activity, will pull down annual GDP growth in 2017. However, as can be seen in the outlook I will be sharing with you in a few moments, a number of elements will help the economy to regain momentum within the projection horizon. Worth noting among these are that no significant macroeconomic imbalances are observed, that the negative impact of the mining investment adjustment has diminished, that the external scenario has improved, and that monetary policy will remain clearly expansionary. Overall, capacity gaps foreseen for the next two years will be somewhat wider than we thought in December, toning down medium-term inflationary pressures. In this context, the Board lowered the monetary policy interest rate (MPR) by 50 basis points during the early months of the year, speeding up the cuts with respect to provisions made in December. At the same time, we considered that, to ensure the convergence of inflation to the target, it will be necessary to enhance the monetary impulse somewhat, which reflects in an MPR trajectory similar to the one implied by financial asset prices during the ten days prior to the statistical closing of this Report.
In the case of mining production, although its impact on GDP of the first quarter is significant as it is determined mostly by supply-side factors, it is deleted from the Other GDP calculation that the Bank uses in its models to measure the activity gap and the medium-term inflation outlook. Thus, the change in the projected range for 2017—of half of one percentage point— responds to two major factors. On the one hand, about half is explained by Escondida mining downtime and other incidents during the first quarter. On the other hand, the greater weakness we saw in the course of 2016 gives a lower starting point for the economy this year. In particular, because this weakness has been observed in sectors that tend to be more persistent in their dynamics, such as construction and associated areas. We must not forget that this sector received a significant boost in 2015, which lasted into early 2016, as a result of the new VAT that would be charged to the sector under the tax reform. Such reduced strength responds largely to the end of this boost. There is also the effect that the lending standards of mortgage loans have tightened too, given the higher down payment demanded by the banks. Another important issue worth looking into are the changes in inventories over recent years. The year 2016 completed three years of inventory depletion, which is quite uncommon. In general, inventory movements reflect how companies predict the future: if they are optimistic about it, they accumulate, and vice-versa.