Chile: Economy improves in the first quarter
GDP growth accelerated to 0.8% on a seasonally adjusted quarter-on-quarter basis in the first quarter, from 0.2% in the fourth quarter of last year. Q1’s reading marked the best result since Q4 2021.
Private consumption plunged at the steepest rate in over two years, falling 2.5% in the first quarter (Q4 2022: -0.8% s.a. qoq). Private spending was likely weighed on by a softening labor market, double-digit inflation and interest rates, and declining real wages. In contrast, public consumption improved to a 5.4% expansion in Q1 (Q4 2022: +2.0% s.a. qoq). Meanwhile, fixed investment fell at a sharper pace of 0.9% in Q1, down from the 0.7% contraction in the previous quarter, amid soft business sentiment and tight financial conditions.
Exports of goods and services bounced back, growing 0.5% in Q1 (Q4 2022: -0.6% s.a. qoq). In addition, imports of goods and services slid at a slower rate of 4.6% in Q1 (Q4 2022: -7.2% s.a. qoq), marking the best reading since Q2 2022.
On an annual basis, economic activity contracted 0.6% in Q1, up from the previous period’s 2.3% fall but still weighed on by a challenging base effect.
Looking ahead, the Consensus is for the economy to slip back into contraction in Q2 before a rebound in the second half of the year, as EIU analysts comment:
“We expect a sequential contraction in the second quarter, as high interest rates will weigh on the economy, but an easing of monetary policy in the second half of the year, coupled with strengthening global demand and a more benign policy outlook amid a conservative constitutional reform process, will rekindle growth.”