Chile consolidates its economic recovery in the third quarter

RIO DE JANEIRO, BRAZIL – Chile’s Central Bank informed that the Chilean economy strengthened its recovery after the covid-19 pandemic by registering a growth of 4.9% in the third quarter compared to the previous three months and 17.2% compared to the same period of the previous year.

“This high dynamism was due to several factors, such as the greater openness of the economy and the measures deployed to support households and businesses,” said the Minister of Economy, Lucas Palacios.

The inter-annual growth figure is slightly lower than the one projected by the markets. Still, it is in line with the previous quarter’s increase, when the economy grew by a historic 18.1% compared to the same period of the previous year.

According to the issuing entity, the figure reflects the partial withdrawals of pension funds, a measure approved three times during the pandemic to alleviate household economies and a low comparison base.

In the third quarter of 2020, the Chilean economy contracted by 9.1% year-on-year due to the covid-19 health crisis, which had much of the still confined and economic activities semi-paralyzed.

The strongest economic growth was in the services sector, with personal and business services standing out, but also in the commerce and construction sectors, the latter experiencing a rebound in investment, Palacios explained.

Meanwhile, the powerful mining industry – which accounts for nearly 10% of GDP and has not ceased operations throughout the health crisis – recorded a 4% year-on-year fall and a 4.9% drop compared to the previous quarter.

With 2% of world production, Chile is the world’s leading exporter of copper, a metal that is fundamental in energy transmission and which on May 10 reached an all-time high price of 4.86 dollars per pound.

The other activity that fell was agriculture and forestry, by 3.8% year-on-year, with a decline in all its components.

The trade deficit also harmed the GDP, which was US$6.5 billion due to a 1.7% increase in exports and a 38.3% rise in imports.

With 1.7 million people infected and more than 38,000 deaths due to covid-19, Chile has experienced a slight upturn in the last two months. Still, since August, the situation has been under control, with positivity rates below 4% and hospitals far from saturation.

No localities are under quarantine; borders reopened for vaccinated tourists in October after a closure of more than six months, and restaurants, bars, gyms, and stores are active.

The pandemic’s reversal is mainly due to the country’s successful vaccination process. More than 90% of the target population is fully inoculated, and more than 7 million have received a booster dose.

In 2020, the pandemic caused the economy to fall by 5.8% – the worst drop in four decades – but in August, the Central Bank increased its gross domestic product (GDP) growth projection in 2021, estimating that it will range between 10.5% and 11.5%.

Meanwhile, the Economic Commission for Latin America and the Caribbean (ECLAC) pointed to an increase of 9.2% for this year.

The country is going through pressing inflation, which according to the Central Bank, could reach 6% by the end of the year, which led the institution to raise the benchmark interest rate aggressively to 2.75% in October, accelerating the withdrawal of the monetary stimulus that had begun in July.

With information from EFE