Skyline in Chile

Chile GDP Q3 2023

Chile: Economy bounces back in Q3

GDP expanded 0.3% on a seasonally adjusted quarter-on-quarter basis in the third quarter. This contrasted the 0.3% contraction recorded in the second quarter and was in line with the provisional estimate calculated from monthly economic activity data. On an annual basis, GDP increased 0.6% in Q3, contrasting the previous quarter’s 0.8% fall. Q3’s reading marked the best result since Q2 2022. In Q3, the economy benefited from improved copper output, lower inflation, interest rate cuts and surging hydroelectric generation thanks to recent rains.

Looking at expenditure components, household spending improved to 1.2% seasonally-adjusted quarter-on-quarter in the third quarter, which marked the best reading since Q3 2021 (Q2: +0.2% s.a. qoq). Public consumption, meanwhile, rebounded, growing 0.9% in Q3 (Q2: -2.2% s.a. qoq). Fixed investment contracted 2.2% in Q3, marking the worst result since Q2 2022 (Q2: +0.9% s.a. qoq). Exports of goods and services growth hit an over one-year high of 1.3% in the third quarter (Q2: -1.4% s.a. qoq). Conversely, imports of goods and services deteriorated, contracting 1.3% in Q3 (Q2: +3.2% s.a. qoq).

Turning to Q4, our Consensus is for further mild GDP growth in quarterly and annual terms, with the economy aided by further falls in inflation and interest rates. That said, investor uncertainty over the new constitution and potential tax hikes are likely constraining investment.

On the recent data and outlook, Itaú Unibanco analysts said:

“Slight upside revisions to GDP in previous quarters and the positive surprise for 3Q23 should likely lead to a milder contraction (or even a null variation) for the economy this year, relative to our -0.3% call. Of note, Chile’s GDP has surprised to the upside in the past three consecutive prints, with net exports playing an important role, leading to upward revisions in this year’s growth forecast. However, even as private consumption is expected to sequentially improve, a weak labor market should limit greater momentum, while the outlook for private investment remains challenging.”

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