GDP Growth Historic and Projected
The Chilean economy continued to recover rapidly from the slump in activity caused by the Covid-19 outbreak in early 2020. In 2021 activity expanded by an annual 17.2% in the third quarter (and by 4.9% from the second quarter). The withdrawal of many pandemic related restrictions, including the curfew and limits on international travel, contributed to significant recoveries in services and construction.
Boosted by pensions withdrawals and extended government support to households, retail sales continued to boom. Preliminary data from the Central Bank suggested that the recovery continued into the fourth quarter with activity growing by 15.0% in the year to October 2021. Private consumption was the main driver of economic growth in 2021, reflecting US$70 billion worth of additional household liquidity provided by pensions withdrawals and government transfers.
Investment also recovered rapidly, rising almost 30% in the year to September, reflecting the reactivation of several major investment projects, especially in the mining sector. Imports of capital goods rose almost 40% during the first eleven months of 2021.
Private consumption and retail sales are expected to slow significantly in 2022 following the withdrawal of the Emergency Family Income supplement and the rejection of a fourth pensions withdrawal bill in December 2021.
Inflation accelerated in the final months of 2021 with the government’s Consumer Price Index rising by 0.5% in November (following increases of 1.2% and 1.3% in September and October, respectively). This pushed annual inflation to 6.7%, up from 4.8% three months earlier and to its highest level in a decade. Inflation ended the year at around 7.0%.
Higher energy prices combined with the fall in the value of the Chilean peso explained much of the rise. Petrol prices rose almost a third during 2021, exceeding CLP 1,000/litre (US$1.19) in petrol stations in Santiago for the first time ever. Discounting often volatile energy and food prices, inflation rose by 5.8% in the twelve months to November 2021.