Chile: Economy flatlines in the second quarter
GDP was unchanged on a seasonally-adjusted quarter-on-quarter basis in the second quarter, above the 0.6% contraction recorded in the first quarter.
Private consumption contracted 2.4% in Q2, marking the worst result since Q2 2020 (Q1: +0.4% s.a. qoq) and likely dampened by higher inflation, interest rates and unemployment. Public spending fell 3.0% in Q2 (Q1: +6.4% s.a. qoq). Fixed investment dropped at a milder rate of 1.0% in Q2, compared to the 7.0% decrease recorded in the previous quarter, amid heightened policy uncertainty due to the change of government and the constitutional reform process.
Exports of goods and services increased 1.6% on a seasonally-adjusted quarterly basis in the second quarter, which contrasted the first quarter’s 0.1% contraction. Conversely, imports of goods and services dropped at a quicker pace of 1.3% in Q2 (Q1: -1.0% s.a. qoq).
On an annual basis, economic growth moderated to 5.4% in Q2, compared to the previous period’s 7.4% growth.
Looking ahead, our panelists expect Chile’s economy to contract quarter-on-quarter in Q3 and Q4, weighed on by falling real wages, weak investment due to policy uncertainty, and the Central Bank’s aggressive tightening stance. Momentum in 2023 will also be subdued amid a weak global growth panorama. While the rejection of the proposed constitution in the September referendum and a subsequent cabinet reshuffle should support business sentiment somewhat, investment will be held back until the constitutional reform process is completed. This is unlikely to happen until H2 2023 at the earliest.