Among firms that report in pesos, the debt is mostly concentrated in those with a limited individual currency mismatch: firms with a mismatch Page 8 of 20  Central Bank of Chile September 2019  of over 10% of their assets hold just 3% of external debt, and represent about 10% of the total number of companies that use the Chilean peso as accounting currency. Local institutional investors’ participation in the local sovereign debt market, especially in the longer segments of the yield curve, is much higher in Chile than in most emerging economies, at 80 to 90%. Thus, the buy-and-hold strategy of these investors reduces the volatility of both local sovereign rates and domestic funding costs. By now, the Chilean financial sector is one of the most developed in the emerging world. It has transited from being largely dominated by traditional banking to being composed by several other market participants, including Pension Funds, General Fund Administrators and Insurance Companies; among others. Assets under management of these non-bank investors went from less than 1% of GDP in 1984, to Page 9 of 20  Central Bank of Chile September 2019  65% in 2000, and to almost 100% of GDP in 2018. This development has translated into improved access to alternative sources of funding by Chilean firms. Currently, around 85% of total corporate bonds are held by institutional investors, thus reliance on banking credit of these corporations has gone from 91% of financial debt in 1986 to around 25% in recent years.
I’ll also go into some detail about the outlook for inflation. Finally, I’ll discuss what this means for monetary policy and the road ahead. Before I continue, I need to give the standard Fed disclaimer that the views I express today are mine alone and do not necessarily reflect those of the Federal Open Market Committee (FOMC) or others in the Federal Reserve System. Economic Outlook I’ll start by saying that the headline of our economic story is good news: the recovery continues to show solid momentum. But the subheading is that we’ll need to be patient. Even with the strong pace of growth we experienced much of this year, a full recovery from the pandemic will take time to complete. The adjustment to rapidly changing circumstances, along with a resurgence in COVID-19 cases, is affecting consumer spending and jobs, sustaining supply bottlenecks in sectors such as autos, and delaying a full reopening of the service sector. So, to continue with the news analogy, here’s the lede: I expect gross domestic product, or GDP, to increase around 5 ½ to 6 percent this year. My current forecast accounts for strong growth in the first half of 2021, but also balances some slowing of growth in the remainder of the year relative to the first half. Now I’ll turn to employment, something I know many of you as business leaders watch closely. Job gains by and large have been strong in recent months.