Even so, it is estimated that, in the central scenario, the Monetary Policy Rate (MPR) will stay below its neutral level throughout the policy horizon, underpinning a recovery process that will continue to be met with significant challenges. I will now describe our assessment of the economic outlook and related risks. II. The macroeconomic scenario  So far into this year, the Chilean economy has outperformed expectations, notably because the impact of the quarantines on activity was significantly milder than we anticipated. In fact, although activity declined during March and April, the effect of the increased sanitary restrictions was about one fifth of what we saw at the onset of the pandemic. Several factors have contributed to this result: the greater adaptation of businesses to the social  Page 1 of 27  distancing requirements; the support of favorable financial conditions; adjustments to the Step-by-Step Plan; and the boost to demand by public policies (Figure 1). Pension fund withdrawals and massive fiscal transfers have been fundamental determinants of the dynamism of private consumption, which has spearheaded the economic upswing. In the first quarter, private consumption had already grown by almost 5 percent annually, with a nearly 50 percent increase in spending on durables, most notably to purchase technological items and automobiles. Information from retail trade, supermarket sales, and electronic billing shows that consumption of goods remained dynamic through April and May. Spending on services, despite recovering part of last year’s decline, continues to show negative annual variation rates, reflecting the persistence of supply-side constraints.

On the one hand, the latest available version of the CBC’s survey of large-scale investment projects shows little change in the number and volume of projects committed for the next five years and a low inflow of new projects by historical standards, a trend that has been maintained for some quarters now. On the other hand, although imports of capital goods increased significantly in the first part of the year, the evolution of the stock market suggests a less optimistic outlook for the tradable component of investment going forward (Figure 15). Page 4 of 27  A core element in these projections is fiscal policy, which this year will add a significantly stronger impulse than we contemplated in March, considering the announcements already materialized and the additional spending that will trigger, among other measures, the recently approved household support initiatives. For 2022 and 2023, it is assumed that a massive fiscal impulse such as this one will not be maintained, giving way to policies focused on the most lagging segments and the stabilization of public finances. Thus, after reaching record expansiveness in 2021, the central scenario assumes that fiscal accounts will enter a path of convergence to structural targets and towards a sustainable public debt-to-GDP ratio, in line with the recommendations of the Autonomous Fiscal Council. This could be reinforced through permanent increases in tax revenues stemming from the reforms that have been recently announced by the Government.