CEPAL Review no. 124

220 CEPAL Review N° 124 • April 2018
Figure 5
Adverse scenario
30
25
20
15
10
5
0
A. Net debt, including the Pensions Reserve Fund (FRP)
(Millions of pesos; as a percentage of GDP)
85 000 000
65 000 000
45 000 000
25 000 000
5 000 000
-5
-15 000 000
-10
-15
-35 000 000
-20
-55 000 000
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
25
B. Net debt, including the Pensions Reserve Fund (FRP)
(Millions of pesos; as a percentage of GDP)
20
15
41 000 000
10
5
21 000 000
0
1 000 000
-5
-10
-19 000 000
-15
-20
-39 000 000
-25
-59 000 000
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
Millions of pesos
As a percentage of GDP
Source: Prepared by the authors.
As expected, an adverse activity shock fuels greater indebtedness (either by taking on more
gross debt or by selling assets). A scenario in which activity slows sharply in 2018 could lead to
net debt in excess of 20% of GDP in 2021 and trending up to reach 26% of GDP by the end of the
projection period. This mainly reflects the fact that an adverse scenario, such as the one described,
causes real GDP to dip below trend, thereby widening the output gap. Thus, the central government
is forced to borrow or sell assets to meet its commitments and, at the same time, attain the
CAB target.
Fiscal sustainability and the cyclically adjusted balance policy: methodology and analysis for Chile