Government achieves fiscal surplus for the first time in a decade
According to authorities, the balance in fiscal accounts closed at 1.1% of GDP (Ch$2.959 trillion / US$372 billion), a figure that has not been positive since 2012.
Treasury Minister Mario Marcel and Budget Director Javiera Martínez have released a summary of the 2022 Fiscal Budget implementation.
The authorities highlighted significant tightening in public spending under President Gabriel Boric. The 23.1% reduction, in real terms, makes this the greatest fiscal consolidation effort in Chilean history. The administration’s fiscal policy has thus rebalanced the country’s macroeconomic figures in the wake of heavy 2020 and 2021 spending, when total spending was up 11% and 33.3%, respectively.
Last year, the fiscal tightening was concentrated in current spending (-26.3% for the year in real terms), particularly subsidies and donations largely associated with Universal Emergency Family Income (IFE) and Middle-Class Support payments in 2021. Capital expenditures to develop investments were up 4.7% in 2022.
These spending cuts, combined with increased revenue, up 6.3% in real terms, resulted in a 2022 year-end surplus of 1.1% of GDP (Ch$2.959 trillion / US$372 billion), the first positive balance since 2012.
Treasury Minister Mario Marcel spoke about expectations for the coming fiscal year: “While a series of factors brought one-time improvements to fiscal revenue in 2022, we have to be realistic about 2023. Once those effects wear off, we have to set achievable fiscal targets. We had already made year-to-year projections last April. While the forecast improved for 2023, it did not include positive surplus figures.”
He also commented, “We have to be responsible about what is possible to achieve and what is not. In any case, this will be a year of fiscal consolidation after the large budget imbalances of 2020 and 2021. Our trajectory over the coming years will converge on a balance close to zero by the end of this presidential term.”
The Budget Director confirmed the administration’s commitment to fiscal responsibility: “Throughout the year, we put great emphasis on consolidating fiscal spending. These efforts are primarily evident in lower current spending, mainly as a result of reductions in subsidies and donations associated with Universal IFE payments.” She added that spending was down even though the significant spending associated with the Universal Guaranteed Pension (PGU) program was not initially in the 2022 Budget.
Authorities also reported that gross debt closed 2022 at 37.3% of the estimated GDP, which reflects the administration’s efforts to consolidate spending and normalize the public debt trajectory.
Notably, following slower progress on capital expenditures in early 2022, the execution rate for capital expenditures was up in the second half of the year, thanks to measures implemented by the administration. In the second half of 2022, it was 57.5%, compared to a 2013-2021 historical average of 55.5%.
Budgetary spending for the year (including the Temporary Emergency Fund) was 107.3%, with current spending at 111.9% and capital expenditures at 86.3%.
Source: Treasury Ministry