1. Macroeconomic Outlook
ALEJANDRO MICCO A.
Undersecretary of Finance
Macroeconomic Outlook
BALAS
April 07th 2017

2. Outline 1. Macroeconomic Framework 2. Fiscal Policy
3. Productivity and Potential Growth

3. Outline 1. Macroeconomic Framework 2. Fiscal Policy
3. Productivity and Potential Growth

4. Chile at a glance 1990 2015 Total Surface area (sq. Km) 756.626
1990
2015
Total Surface area (sq. Km)
Population (million people)
13,2
17,8
GDP (US$ billion)
32,6
240,2
GDP per capita PPP (US$)
5.847
23.460
GDP Growth
3,40%
2,1%
GDP Growth forecast 2016 %
Poverty (% of population)
38,6
14,4
Gini coefficient
0,56
0,49
Crecimiento acumulado del PIB entre 1990 y 2014 fue de 235%
Crecimiento acumulado del PIB per capita (real) entre 1990 y 2014 fue de 146%
Crecimiento acumulado del PIB per capita PPP (entre 1990 y 2014) fue de 316%
Crecimiento acumulado del PIB per capita PPP dolares 1990 (entre 1990 y 2014) fue de 143%
Source: Central Bank, IMF, National Statistic Office , Ministry of Social Development.

5. Chile an Open Economy
Crecimiento acumulado del PIB entre 1990 y 2014 fue de 235%
Crecimiento acumulado del PIB per capita (real) entre 1990 y 2014 fue de 146%
Crecimiento acumulado del PIB per capita PPP (entre 1990 y 2014) fue de 316%
Crecimiento acumulado del PIB per capita PPP dolares 1990 (entre 1990 y 2014) fue de 143%
Trade Agreements: 25 – 64 countries – 86% of world GDP
: NAFTA – EU – China – Japan – TPP

6. Chile an Open Economy Double Taxation Avoidance Agreements (DTAA )
Crecimiento acumulado del PIB entre 1990 y 2014 fue de 235%
Crecimiento acumulado del PIB per capita (real) entre 1990 y 2014 fue de 146%
Crecimiento acumulado del PIB per capita PPP (entre 1990 y 2014) fue de 316%
Crecimiento acumulado del PIB per capita PPP dolares 1990 (entre 1990 y 2014) fue de 143%
79%

7. Chile a Sound Economy Independent Central Bank Inflation Targeting
Fiscal Rule
Structural Income
Independent Committees defines LT GDP growth and LT Price of copper
Sound Regulatory System
Global Competitiveness Index (Rank 2015)
Soundness of banks: / 144
Regulation of securities exchanges 23 / 144
Financial market development / 144
Crecimiento acumulado del PIB entre 1990 y 2014 fue de 235%
Crecimiento acumulado del PIB per capita (real) entre 1990 y 2014 fue de 146%
Crecimiento acumulado del PIB per capita PPP (entre 1990 y 2014) fue de 316%
Crecimiento acumulado del PIB per capita PPP dolares 1990 (entre 1990 y 2014) fue de 143%

8. GDP Growth - Exports (YoY, percentage)
Source: Central Bank of Chile

9. International Backdrop
Price of Commodities and Copper
(Index 2005=100, USD/lb)
Source: Central Bank of Chile and IFM

10. International Backrop
World trade growth
(YoY rolling quarter, percentage)
Commercial Policy G20 members (Number of actions affecting trade)
Fuente: WTO, Global Trade Alert, CEPR
Note: Global Trade Alert provides real-time information on state measures taken that are likely to affect foreign trade. In addition, it identifies trading partners likely to be harmed by these measures.

11. GDP and imports of chilean trading partners
(real YoY, percentage)
Source: WTO, World Bank y Bloomberg.
Nota: 2016 estimated with actual data up to the third quarter. Chinese imports estimated on the basis of nominal data.

12. External Adjustment Real exchange rate Current account deficit
(Pesos of February 2016)
Current account deficit
(Percentage of GDP)
Source: Central Bank of Chile and central banks of each country.

13. Monetary Policy, Inflation and Exchange Rate

14. Real Exchange Rate (local currency/dollar, index january 2015=100)
Source: Central banks of each country

15. Non-mining GDP Chile and Peru (Real YoY, percentage)
Source: Central Bank of Chile, INEI Perú

16. Outline 1. Macroeconomic Framework 2. Fiscal Policy
3. Productivity and Potential Growth

17. Fundamental principles of fiscal policy
Permanent expenditures must be financed with permanent incomes
Social policy
Tax Revenues
Efficient –Focalized- and Transparent spending
Fiscal Responsibility law (2007)
Transparency law (2016)

18. Central Government Balance
Fiscal Balance
Central Government Balance
(% GDP)
Fuente: Budget Office

19. Tax Reform 2014 and Fiscal Balance
Additional Collection
(% of GDP)
The Law N° of the Tax Reform (september 2014) and the Law N° Simplifications of the Tax Reform (february 2016) has the following objetives:
Increase the tax burden by 3% of GDP, to finance permanent expenses with new permanent revenues.
Advance on tax equity by improving income distribution.
Introduce more efficient savings and investment incentives.
Reduce evasion and avoidance.
Taxes rate according to regime

20. Fiscal Revenues Fiscal revenues (Percentage of GDP)
Source: Budget Office
Note: OthersProvisional tax, donations, property income, operating income, others income and sale of fixed assets

21. Net tax revenue of the Central Government 2016
% total
Real YoY (%)
1. Income Taxes
39,4%
-5,8%
Private mining
0,0%
-99,1%
Others Taxpayers
5,7%
2. Value Added Tax
48,5%
2,1%
3. Taxes on specific products
8,7%
Tobacco and cigarettes
3,5%
-1,1%
Fuels
5,2%
4,2%
Rights of extraction of the fishing law
12,6%
4. Stamp tax
1,6%
62,8%
5. Taxes of international trade
1,1%
-13,4%
6. Others
0,7%
168,5%
TOTAL TAX REVENUE
100,0%
0,9%
Fuente: Budget Office

22. Forecast Net Tax Revenue Budget Law 2017 (millons of pesos 2017 and % YoY)
Collection Forecast 2017
% YoY 2017/
2016
1. Income Taxes
7,7
Private Mining
235,3
Others Taxpayers
-1,8
2. Value Added Tax
4,0
3. Taxes on specific products
3,2
Tobacco and cigarettes
0,3
Fuels
5,1
Rights of extraction of the fishing law
9.681
3,5
4. Stamp Tax
0,2
5. Taxes of international trade
6,5
6. Others
-119,4
TOTAL TAX REVENUE
Fuente: Budget Office

23. Structural Consolidation (% of GDP)
Note: Excludes extraordinary revenues from capital registry in 2015 and 2016.
Source: Budget Office.

24. Outline 1. Macroeconomic Framework 2. Fiscal Policy
3. Productivity and Potential Growth

25. Productivity Enhancing Policies
Education
Better financing
Productive diversification
and innovation
Energy policy
Infrastructure development and logistics
State efficiency
Market competitiveness

26. News Opportunities

27. Global Trade in Goods and Services

28. Trade in goods have been flat post the 2008 crises
Export of Services
Trade in goods have been flat post the 2008 crises
Trade in services have been increasing
In particular others services
Chile has comparative advantages

29. Chile has comparative advantages
Export of Services
Time Zone
Chile has comparative advantages
The highest educational coverage and quality in LAC.
First in LAC in PISA ranking –Lecture, Math., Sciences-
2 top ten Universities in LAC
The highest coverage of (No) Double Taxation Agreements. 62%-80% of world GDP.
The first or second best technological infrastructure in LAC (Uruguay)

30. Education Performance of secondary students
Enrolment ratio – pre escolar education
(%)
Performance of secondary students
(PISA mean scores, 2015)
Note: The enrolment rate is expressed as a percentage of the official school-age population corresponding to the same level of education. The population used is between 0 and 4 years.
Source: UNESCO Institute for Statistics and OCDE, PISA 2015.

31. Education Public cost of the educational reform (Percentage of GDP)
Source: Budget Office

32. Education Public expenditure on pre-escolar education per child
(Annual average, thousands pesos of 2016)
New institutions for quality and mandatory certification for establishments.
new vacancies created until now and goal of to
Note: Average per child calculated on the population between 0 and 4 years.
Source: Budget Office and INE.

33. Education Public expenditure on educational career
(Percentage of GDP)
Effectiveness in classroom depends on attract the best people to teach and encourage their improvements.
To improve salaries and working conditions that recognize work outside the classroom.
Source: Budget Office

34. Education Advances in Tertiary Education and boost Technical Education
Coverage:
15 New Technical Centers
Two new regional universities, O’Higgins and Aysén.
Financing
students without fees and students with scholarship “Nuevo Milenio” for 2017, ensuring access to tertiary education to the 50% most vulnerable of the population.
Nota: Number of beneficiaries corresponds to the last estimate of allocations according to MINEDUC.

35. ALEJANDRO MICCO A.
Undersecretary of Finance
Thank you
April 07th 2017