Chile GDP Q3 2016


Chile: Chilean economy expands again in Q2 but growth remains weak

November 18, 2016

The economy of the world’s largest copper producer stalled in the third quarter and there are no clear signs that activity will improve in the final quarter of the year. The performance in Q3 shows that Chile’s economy continues to be restrained by subdued copper prices, weak economic sentiment and uncertainty about the government’s economic reform agenda. GDP expanded 1.6% over the same quarter of the previous year, which mirrored the revised expansion recorded in the second quarter (previously reported: +1.5% year-on-year). As a consequence, growth remains at its lowest level in over a year. The reading surprised the markets as they had expected the economy to expand 1.5%. Q3’s expansion came on the back of an increase in external sector’s contribution to overall growth, mostly due to a contraction in imports. In Q3, domestic demand disappointed in the third quarter.

In Q3, growth in domestic demand deteriorated from 1.5% in the second quarter to 0.8%. The deceleration came on the back of a 1.2% year-on-year contraction in fixed investment (Q2: +3.0 yoy). Moreover, while still at high levels, growth in government consumption slowed to 6.9%, down from 7.6% in Q2. By contrast, household consumption improved from a 1.8% increase in the second quarter to a 2.0% expansion in the third quarter boosted mainly by consumption in services.

On the external side of the economy, growth in exports of goods and services remained dismal in the third quarter. Overseas sales expanded only 0.5% over the same quarter of the previous year, which was down from the 0.9% increase seen in the second quarter. Growth in exports was mainly attributed to the services component. Moreover, imports swung from a 0.2% rise in Q2 to a 1.4% decrease in Q3. The disappointing figure was due to lower imports of industrial goods, while imports of services improved only marginally. As a result, the external sector’s net contribution to overall growth improved from 0.5 percentage points in Q2 to 0.8 percentage points in Q3.

On a quarter-on-quarter basis, the economy averted a technical recession and GDP expanded 0.6% in seasonally-adjusted terms. The reading benefited from a base effect since the economy contracted 0.4% in the second quarter—the first contraction in six years.

The Central Bank sees GDP expanding between 1.50% and 2.00% this year. For next year, the Bank forecasts an expansion of between 1.75% and 2.75%. Panelists participating in the LatinFocus Consensus Forecast see the economy growing 1.7% in 2016, which is unchanged from last month’s forecast. For 2017, the panel expects the economy to pick up the pace and expand 2.1%, which is down 0.1 percentage points from last month’s estimate.

Author:, Senior Economist

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Chile GDP Chart

Chile GDP Q3 2016

Note: Year-on-year changes of GDP in %.
Source: Chile Central Bank (BCC) and LatinFocus Consensus Forecast.

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