Enrique Marshall

ENRIQUE MARSHALL Director Master in Banking and Financial Markets PUCV, Former Vice President of the Central Bank

Enrique Marshall

Advanced economies periodically prepare an aggregate balance for the household sector. They do so because it is a good instrument for formulating diagnoses and designing policies. The United States, for example, prepares a balance in considerable detail and disaggregation. It shows that real assets, such as own housing and household equipment, have lost relative importance, while financial assets have gained ground.

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In Chile, the National Accounts report on household financial assets and liabilities, but do not provide data on real assets, so we have a gap with respect to advanced economies. In a recently published study, I made a tentative estimate of the household balance in Chile. What can be inferred? On the one hand, that real assets, including one’s own house and household equipment, represent around 50% of the total; and on the other, that pension funds follow in importance. Together, these two items reach 80% of the total.

This composition of family assets has implications. The main one is that the policies to promote savings should be oriented as a priority to the acquisition and financing of one’s own home and the promotion of pension savings. Not surprisingly, public policies in advanced economies are oriented precisely after these two objectives.

Without prejudice to having incomplete information, it is evident that the balance of households is under severe stress in our country. This raises concern about its implications on consumer spending, and on the financial position and solvency of families in a medium and long-term perspective.

What are the causes of this tension? First, the savings rate over GDP has plummeted, reaching the lowest level in the last 10 years, in circumstances where saving is what feeds the balance of households.

Second, a growing fraction of families are faced with serious limitations in acquiring a home of their own, with the implications that this entails for savings and the accumulation of real assets.

Third, pension assets, for the first time in ten years, have contracted, as a result of withdrawals from pension funds. The most recent figures show a fall in these assets of 15% in twelve months, which could be accentuated in the near future.

Finally, inflation, interest rates and stock prices are observing very unfavorable evolutions for the valuation of financial investments.

In this context, the Central Bank would do well to improve the sector accounts, calculating complete financial statements for households. This would allow the changes in progress to be monitored with greater precision.

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