Chile’s annual growth rates have consistently been positive since the turn of the century, buoyed by high copper prices and internationally acclaimed economic policies. It dropped into negative territory during the global financial crisis during 2008 and 2009, and briefly after the huge earthquake in 2010. In 2020 it dropped again due to the double impact of the social crisis outbreak at the end of 2019 and the onset of COVID in March 2020. Also see GDP Growth actual and projected.
The Imacec is an estimate that summarises the activity of the different branches of the economy in a given month, at prices from the previous year. The calculation of the Monthly Economic Activity Index is based on multiple supply indicators, which are weighted by the share of economic activities in the previous year’s GDP.
Source: Central Bank of Chile.
Which is produced by the Adolfo Ibáñez University and ICARE, slipped to 49.04 points in November 2021, moving back into negative territory for the first time in almost a year. Executives surveyed by the Central Bank in October 2021 found that while most of them had seen a significant improvement in sales this year, they were concerned by rising costs, labour shortages, and uncertainty relating to the evolving political situation.
Source: Adolfo Ibáñez University, ICARE.
The long-term aim of Chile’s independent Central Bank is to hold inflation at around 3%. Prior to the onset of COVID 19 this was largely achieved by careful fiscal management.
The consumer price index, used here as a proxy for inflation, demonstrates that the recent hike in inflation was driven by a surge in retail spending. This in turn was a consequence of the large injection of cash into the economy stemming from the government’s pension withdrawal scheme and other social support mechanisms. Also see here.
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.
