Chile registers the largest contraction since the beginning of the pandemic

Chile’s economy recorded its biggest quarterly contraction since the beginning of the Covid pandemic, after both annual inflation and the benchmark interest rate reached multi-decade highs, affecting businesses and households.

The Gross Domestic Product (GDP) fell by 1.2% in the third quarter compared to the previous three months, which contrasts with the median estimate of a 1% decline by analysts surveyed by Bloomberg. In the interannual comparison, the economy expanded by 0.3%, informed the Central Bank of Chile on Friday.

The Chilean economy is entering a slowdown while the Central Bank is battling inflation that has barely achieved a maximum of three decades.

Those in charge of monetary policy added 10.75 percentage points to the rates before deciding to suspend the adjustment, and warned that the declines in investment and demand will persist until the next year. At the same time, unemployment has increased, which indicates that the labor market is weakening.

Domestic demand fell 3.3% during the third quarter compared to the period between April and June, while mining also declined by 3.3%, according to the central bank. The nation’s current account deficit increased to US$9.43 billion.

Important Chilean authorities, among them the Finance Minister, Mario Marcel, and the President of the Central Bank, Rosanna Costa, classified the slowdown in activity as necessary, saying that the increase in GDP over the past year was 11.7%, was unsustainable and led inflation to be exceeded with increases to the 3% target.

The country’s GDP will expand between 1.75% and 2.25% this year, to later contract to 1.5% in 2023, according to the most recent estimates from the central bank.

With information from Bloomberg Línea