Chile: Economy grows marginally in Q1 2020
May 18, 2020
Economic activity bounced back in the first quarter, with GDP expanding 0.4% on an annual basis (Q4 2009: -2.1% year-on-year).
Household spending fell 2.2% year-on-year in Q1 2020, improving from the 3.8% downturn seen in Q4 2019. Similarly, government spending declined at a milder pace of 1.0% in Q1 (Q4 2019: -7.4% yoy). Meanwhile, fixed investment growth slowed to 0.4% in Q1 from 2.7% in the prior quarter.
Exports of goods and services grew 1.4% in Q1 (Q4 2019: -3.5% yoy). In addition, imports of goods and services contracted at a steeper rate of 8.9% in Q1 (Q4 2019: -7.5% yoy), marking the worst outcome in over five years.
On a quarterly basis, economic growth rebounded to 3.0% in Q1 from Q4 2019's 4.1% contraction. Q1's reading marked the strongest increase since Q2 2010.
Despite Q1’s marginal expansion, the economy is poised to shrink this year as Covid-19 takes its toll. Economic activity is slated to contract at a severe rate in the second quarter on the Covid-19 fallout. Consumer and capital spending are set to fall amid prolonged social distancing, while stifled external demand should hammer exports. Moreover, uncertainty surrounding the upcoming constitutional process may restrain the pace of economic recovery following the end of the pandemic.
Author: Nicolás J. Aguilar, Economist