Chile: Economy expands at the fastest pace this year in Q3
Growth clocked in at 3.3% year-on-year in the third quarter, accelerating from the second quarter’s 1.9% increase and marking the fastest expansion so far this year. The upturn was broad-based and came largely in line with market expectations.
Domestic activity gained traction in the third quarter. Private consumption growth firmed up following a downturn in the previous quarter (Q3: +3.0% year-on-year; Q2: +2.4% yoy), chiefly thanks to a notable increase in services consumption, which more than offset weaker consumption of durable goods. On top of that, fixed investment continued to gather momentum and increased at the swiftest pace in four years in the third quarter (Q3: +5.9% yoy; Q2: +5.3% yoy), supported by booming investment activity in the construction sector. Lastly, annual growth in public spending remained unchanged at the previous quarter’s 1.9% in Q3.
On the external front, operating conditions also improved in the third quarter. Exports rebounded following two consecutive months of contraction (Q3: +1.2% yoy; Q2: -3.4% yoy), amid an upturn in copper production, which buoyed overall exports. Meanwhile, imports contracted again in the third quarter, although the decline was less sharp than in the second quarter (Q3: -1.8% yoy; Q2: -3.5% yoy). As a result, the external sector’s contribution to growth improved considerably in Q3.
Looking at the industry-level performance, the third-quarter upturn was similarly broad-based. Mining GDP increased 1.4% year-on-year in Q3, which was up from the 0.2% uptick recorded in Q2 and marked the strongest expansion since Q2 2018. Furthermore, non-mining GDP growth jumped to 3.6% annually in Q3, from 2.1% in Q2.
On a quarter-on-quarter, seasonally-adjusted basis, GDP rose 0.7% in Q3, matching the previous quarter’s outturn.
Looking forward, growth prospects for the Chilean economy have deteriorated significantly since mid-October, when widespread protests and riots erupted over deep-rooted socio-economic inequality, fueling the biggest political crisis since the country returned to democracy. Consequently, short-term growth prospects have dampened considerably, while uncertainty is elevated over the country’s political and economic course going forward.