RIO DE JANEIRO, BRAZIL – Chile ended 2021 with a budget deficit of 7.6% of estimated gross domestic product (GDP), exceeding even the 2020 mark, when the pandemic caused a 7.1% overspend, according to the Budget Directorate (Dipres) of the Ministry of Finance.
In absolute terms, this is a negative balance of more than US$23 billion, a figure not as high as the one the government had projected last quarter, more than US$24.3 billion – 8.3% of GDP, Finance Minister Rodrigo Cerda said.
“7.6% is an important figure, but it is similar to other countries. It also allowed us to recover our economy and help our countrymen,” he said.
The deficit was due to a “historic” growth in public spending, which reached US$94.7 billion – representing an annual growth of 33.2% – according to the official report, which was mainly influenced by measures to support family economies that were affected by the restrictions imposed by Covid-19.
That figure was not offset by a 37.8% increase in revenues to US$71.6 billion.
The pandemic, which sickened 2.1 million people and killed nearly 40,000, worsened between March and August 2021, prompting the government of President Sebastián Piñera to impose quarantines that lasted more than three months.
Social assistance was increased throughout the year in the form of subsidies and direct transfers to households, which reached 16 of the 19 million citizens and represented an expenditure of US$26.5 million, according to official figures.
At the same time, revenues increased mainly due to a 34.1% increase in tax revenues from taxpayers, large private mining companies, and Codelco, the state-owned copper company, a mineral in which Chile is the world’s leading exporter and whose price reached record highs this year.
VAT revenues rose 36.6% “due to the greater dynamism of private consumption, driven by higher household liquidity and withdrawals from pension funds,” the report said.
According to the latest estimate, Chile’s GDP fell 5.8% in 2020-the worst recession in four decades- could rise 11.5% to 12%.
The pandemic has seen a massive increase in infections in recent weeks due to the rapid spread of the Omicron variant. However, the country has not introduced any new mobility restrictions.