Economic growth will be the focus of attention in the near future. With inflation and interest rates already normalizing, we will return to the discussion about medium-term growth in Chile, key variables for corporate and investment decision-making for the rest of the decade. After a positive dynamism of the economy in 2021 and 2022 - largely explained by private consumption - 2023 has been the year of adjustment. A contraction of around 0.5% in economic activity is expected, in addition to a fragile scenario: consumption is declining sharply, investment is stagnating, and the export sector is showing less dynamism recently, after a robust start to the year. Some of this will begin to improve gradually towards 2024, but there are no compelling reasons to expect strong growth in the coming years, but rather something close to 2%.
What has happened to agriculture? According to figures from the Central Bank, the GDP of the agricultural sector showed zero growth in 2022 and a contraction of close to 4% is expected for this year. Increases in costs, production problems, among others, are behind the economic impact on the sector, being partly offset by a positive export performance and recovering prices. The outlook for the sector is not very different from that for the rest of the economy. An upturn in agricultural growth is expected in 2024 and 2025, closer to 2%, favored by a low comparison base and some rebound in investment, very weak in this cycle, but not much more.
What is needed to improve sectoral growth? As in the rest of the Chilean economy, improve productivity. Studies by the National Evaluation and Productivity Commission (CNP) show that, in economic terms, the agricultural sector was the most productive sector in Chile from 1990 to the last decade. The export boom, the development of the agro-industry and the use of technology in a very backward sector were the factors behind this robust performance, which led to economic benefits, employment and a powerful sectoral development. But in the recent decade this has been significantly reduced. Productivity for the agricultural sector is barely positive in this cycle, the spaces for improvement are narrowing and sectoral investment, for different reasons, has been stagnating. Other sectors are recognized as even more affected, such as mining and construction, but the phenomenon is transversal.
How to improve productivity? The answer is not simple and covers several areas, many of them known: improving human capital, simplifying procedures, technological innovation, increasing infrastructure, among others, seem to be the first stone to improve the path of economic productivity in Chile, rather in the hands of public policies. For the agricultural sector, there are some disruptive business opportunities: the use of data analysis on crops, soil, fertilizers, among others, in addition to adequate crop rotation and the use of technology to increase yields are tools that are already available and that can make a difference in the coming years. There is also a key factor to target investment where the value of production will increase over time and where the agricultural sector has a great opportunity to support productivity and sectoral growth: climate change, a topic that we will address in the next column.
