Before I dive into the detail of the estimates, I would like to make a couple of precisions regarding the concepts of trend and potential GDP. In the first place, it is evident that estimating the growth capacity of an economy is very important when defining monetary policy and macroeconomic policies in general. In fact, not only the Page 2 of 18  Central Bank estimates trend growth, but also the Ministry of Finance to calculate the structural income of the Treasury. In our case, we estimate two concepts: trend GDP and potential GDP. The first has to do with the medium-term growth capacity of the economy, while the second refers to the level of GDP consistent with stable inflation and, therefore, is adequate to measure the activity gap associated with short-term inflationary pressures. Although in the long term the potential and trend growth rates converge to the same number, in the short term there are transitory elements—such as temporary shocks to productivity and restrictions in the use of factors—that alter the productive capacity and cause differences between the two. Hence the importance of analyzing them separately (Figure 4). II.3. Trend GDP The updating of our trend growth estimate—which dated back to 2017—had the purpose of measuring the effects of the considerable immigration flow of recent years on the country's medium- and long-term growth capacity. A box in the Report identifies episodes of significant immigration flows into other economies.
It received so much of media attention due to three reasons: sheer magnitude of the amounts defrauded, high-society profile of some of the investors and the glamorous sainthood that had long been afforded to the man responsible for losing people’s money. There are many more such schemes where people willingly invest without properly assessing the risk and the return. They often fail to ask the simple question which anyone with a fortune may have asked before parting with his money: could the schemes continue to generate a high income to pay a high return indefinitely in the future. But the desire to become rich quickly mars their rational mind and they unknowingly fall victim to the promise of high returns. What can microfinance learn from this? A lot. When one analyses the sakvithi episode, by disaggregating its tragic final outcome into sub components of devices employed, each such sub component teaches us a valuable lesson. These lessons, when viewed from a centric point, boil down to two important aspects of microfinance: the governance structure which microfinance institutions have to adopt and the self-discipline which microfinance beneficiaries should cultivate. Both these important elements in microfinance should not be mere eye-washes to satisfy someone who demands of such behaviour by the respective parties. They should be faithfully and vigorously followed in order to prevent the microfinance industry from meeting with an untimely death. What normally happens in Sakvithi-style investment schemes?