hit hard by the pandemic. the first cases emerged in early - march and contagion seemed to stabilize by end april, only to rapidly escalate over the last month and a half. the country is now in its 15th week of the pandemic, with 250. 000 confirmed cases and active cases stabilizing again. while chile currently stands 8th in number of cases in the world, mortality rates remain low and testing broad, thanks to its stronger health system compared with other emes. 10. the spread of contagion has led authorities to adjust their npc strategies. this has included stricter and broader quarantines, which have grown from 20 % of the population in april to 49 % these days. the share of gdp in quarantined areas has moved from 11 % to 52 % in the same period. page 1 of 3 central bank of chile june 2020 11. this has intensified the impact on economic activity. gdp growth remained in positive ground in the first quarter, but economic activity declined 3. 5 % in march and 14. 1 % in april. figures are likely to be worse for may and june in line with the broadening of lockdowns. central bank estimates from last week set the contraction of gdp between - 5. 5 % and - 7. 5 % in 2020, with the range broadened to take into account uncertainty around the persistence of constraints. 12. assuming that constraints will begin to roll back in the third quarter, we estimate gdp to grow between 4. 75 % to 6. 25 % in 2021, and 3 % - 4 % in 2022. 13. while the drop in gdp in 2020 will be the deepest in 35 years, prospects remain better than in other latin american and caribbean ( lac ) countries. this owes to five factors : a. structural factors are more favorable than in other emes. chile has a deeper domestic financial market, where institutional investors play a major role ; remittances have never been a source of foreign revenue, and the composition of foreign trade means that the terms of trade are improving rather than worsening. even the informal sector, while bigger than in advanced economies ( ae ), at 30 % of the labor force is smaller than it is in other lac countries. b. the exchange rate remains operative as a shock absorber due to the low fx exposure of households, government, financial institutions and the non - financial corporate sector. c. foreign liabilities are appropriately matched

setting of a countercyclical capital buffer. 12 moreover, the ecb is empowered to increase the national countercyclical capital buffer, if the level set by the national macroprudential authority is deemed inadequate. furthermore, the national macroprudential authority in a number of countries is also empowered to employ borrower - based measures ( such as loan - to - value ratios or loan - to - income ratios ) to improve resilience and lean against the financial cycle. in addition, national fiscal policies can also play a role in mitigating the financial cycle, both through macroeconomic and microeconomic channels ( lane 2016 ). importantly, the recent quantitative model developed by philippe martin and thomas philippon demonstrates the complementary roles of macroprudential and fiscal policies in limiting macro - financial volatility in the euro area, with joint deployment more effective than if either instrument were used on its own ( martin and philippon 2016 ). in relation to the inter - relation between financial stability risks and low policy rates, it is important to appreciate that the more quickly inflation approaches the target level, the more quickly will 3 / 5 bis central bankers'speeches policy rates re - normalise, allaying fears of a “ low for long ” stagnation scenario vis - a - vis nominal interest rates. put differently, forceful accommodative monetary policy in the short run is the best method to ensure that policy rates do not stay low for longer than is necessary. conclusions in this speech, i have attempted to provide an overview of the governing council ’ s current monetary policy stance. the governing council is committed to preserving the very substantial amount of monetary support that is embedded in the ecb staff projections and that is necessary to secure a return of the inflation target over the medium term. if warranted, the governing council will act by using all the instruments available within its mandate. meanwhile, the governing council has tasked the relevant committees to evaluate the options that ensure a smooth implementation of the purchase programme. finally, monetary policy is not the only policy instrument that should be deployed in the current euro area environment. the governing council routinely points out that fiscal policy also has an important role to play in supporting economic recovery through a variety of mechanisms, together with policy actions that would enhance medium - term growth prospects, improve resilience and strengthen the financial system. references brunnermeier, markus k., and yann koby “ the reversal interest rate : the effective lower bound