Economy

Chile's Central Bank: as vaccination drive pays dividends, the country's economy gains steam

According to Oxford Economics, Chile's new fiscal package has everything to boost the country's activities in 2021

Chile's Central Bank facade
A security worker guards an entry of the Chilean Central Bank building in downtown Santiago, Chile March 16, 2021. Photo: Reuters/Ivan Alvarado/File Photo
  • The South American nation is among the global leaders in vaccination per capita and has far outpaced its neighbors in Latin America;
  • According to the latest figures provided by the Department of Statistics and Health Information, 34.91% of Chileans have received at least one dose of a vaccine against the novel coronavirus (over 6.6 million individuals).

Chile‘s Central Bank said on Wednesday the economy would grow 6% to 7% in 2021, a greater expansion than previously predicted, buoyed by one of the world’s most successful vaccination drives. The bank predicted average annual consumer prices in the world’s top copper producer would rise 3.4% in 2021, according to its Ipom quarterly economic report.

The South American nation is among the global leaders in vaccination per capita and has far outpaced its neighbors in Latin America. According to the latest figures provided by the Department of Statistics and Health Information, 34.91% of Chileans have received at least one dose of a vaccine against the novel coronavirus (over 6.6 million individuals).

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The more favorable scenario next year will be bolstered by a soaring copper price of $3.95 per pound, the bank predicted. The metal accounts for around half of the South American nation’s exports and is vital to economic output.

Despite bright spots on the horizon, the bank warned in the report that the overall economic recovery has been mixed, with some sectors struggling more than others. The bank said investment, for example, was recovering more slowly than consumption as uncertainty over the pandemic continues to cloud business decisions.

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$6bn fiscal package is likely to boost Chile’s GDP

During the COVID-19 pandemic, Chileans had two opportunities to make withdrawals from pension funds, and they were eager for a third chance to supplement lost income by pulling from these savings. Sebastián Piñera’s administration, however, opted to tap into stabilization funds to boost spending ahead of the November general election. The fiscal package announced on March 22 amounts to $6bn (2.3% of GDP) and aims to support the economy through multiple fronts.

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The package prompted Oxford Economics to raise its baseline forecast for 2021 growth by 0.4ppts to an above-consensus 7%. “Given Chile’s poor track record in executing big stimulus packages, our baseline assumes that just 40% of this one is actually put in place by year-end. If implemented fully, the program could lift growth to 7.5%,” wrote the analysis house.

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