Chile's economy grows 7.2% in Q1, below expectations

LatAm's fifth-largest economy shows signs of cooling off and has been registering unprecedented inflation since the 1990s.

Containers are pictured at the San Antonio port, in Chile August 6, 2019. Photo: REUTERS/Rodrigo Garrido/File Photo

Chile‘s economy expanded 7.2% in the first quarter of 2022 from a year earlier, central bank data showed on Wednesday, fuelled by growth in the services and retail sectors. That is below expectations for a 7.9% increase, according to a Reuters poll of analysts and economists.

Gross domestic product (GDP) fell 0.8% from the previous three months in seasonally adjusted terms, versus a forecast 0.4% drop.

“A large part of the activities registered positive figures, with the biggest gains in service activities – in particular, personal, transport and business — and in retail,” the central bank said.

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Mining, agriculture, forestry, and fishing activities all declined, the bank added.

“The 0.8% q/q contraction in Chile’s GDP in Q1 suggests the economy is coming back down to earth after a stellar 2021, and there is a growing chance of a recession this year,” said Nikhil Sanghani, emerging markets economist at Capital Economics.

In 2021, Chile‘s Gross Domestic Product (GDP) grew 11.7%, the highest level in the country’s history series. It took place on a repressed basis – Chile’s economy plummeted 5.8% in 2020 – and was leveraged by the gradual opening of business in the face of the COVID-19 pandemic. Chile was the country that advanced the fastest with vaccination, right at the beginning of the campaign, in Latin America. Furthermore, the social benefits released exceptionally to mitigate the effects of the health crisis were one more factor in helping household consumption and the Chilean economic recovery.

READ ALSO: Boric’s team plans to reform Chile’s controversial pension program next year

The forecast for 2022, however, is not so optimistic. The Chilean economy is showing signs of cooling off and has been registering unprecedented inflation since the 1990s.

At the beginning of May, Gabriel Boric‘s administration lowered the country’s growth forecast for 2022 from 3.5%, calculated in January by the previous government, to 1.5%. It also raised its estimates for the accumulated inflation at the end of the year to 8.9%.

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