Chile’s Central Bank raises growth forecast for 2021 to 12%

RIO DE JANEIRO, BRAZIL – Chile’s Central Bank on Wednesday upgraded its economic growth forecast for 2021 to a range of 11.5% to 12%, thanks to “greater dynamism in spending” with significant upward adjustments in private consumption and “investment in machinery and equipment.”

“The higher domestic spending has led Chile’s GDP growth to be among the highest in the world, but at the same time means that the economy is operating well above its short-term capacity,” the issuing entity said in a statement.

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In the Monetary Policy Report (IPoM), the Central Bank predicted that Chile’s Gross Domestic Product (GDP) would grow slightly above the 10.5% and 11.5% it had estimated in September.

“Growth in 2021 will exceed what was forecast in September, closing the year with activity levels significantly above pre-crisis levels, as well as its estimated potential,” they indicated in the report.

This year, official aid reached nearly 15 of the country’s 19 million inhabitants in the context of the crisis resulting from the coronavirus pandemic.

To these stimuli were added the millions coming from three different withdrawals from private pension savings accounts approved in Congress since last year, an emergency measure aimed at generating immediate liquidity for families to face the crisis caused by restrictions during the first months of the pandemic.

The Central Bank also reported that growth forecasts for the coming years “will have a significant reduction” and estimated a range between 1.5% and 2.5% for 2022 and from zero to 1% growth for 2023, figures that are more in line with pre-pandemic forecasts.

It also indicated that total inflation “will remain at around 7% for a few months, and then begin to decline to 3% over the two-year policy horizon”.

On Tuesday, the Central Bank announced a sharp increase in its benchmark interest rate, from 2.75% to 4%, amid an inflationary escalation affecting the country due to domestic circumstances and the international context.