Chile: Economy stabilizes in Q4, amid easing Covid-19 measures and fiscal and monetary stimulus
GDP was unchanged year-on-year in the fourth quarter of 2020, improving markedly from the 9.0% decline recorded in the third quarter, amid the easing of Covid-19-related restrictions on commerce and movement, and robust monetary and fiscal stimulus measures. For the year as a whole, GDP contracted 5.8% in 2020, swinging from 2019’s 0.9% uptick.
Q4’s reading reflected an improvement in both domestic and external demand. Private consumption rebounded and grew 4.1% year-on-year in Q4, swinging from Q3’s 9.0% drop, amid recovering yet still-downbeat consumer sentiment and a steady decline in the unemployment rate. Moreover, the contraction in fixed investment softened to 8.9% in Q4 (Q3: -17.0% yoy), thanks to recovering business confidence and supportive government policies, while public spending expanded 3.5% in Q4, contrasting the 3.5% drop recorded in Q3.
On the external front, exports of goods and services dipped 1.0% in Q4, following Q3’s sharper 6.8% contraction, amid recovering global demand. Meanwhile, imports of goods and services declined at a milder yet still-significant pace of 5.9% in Q4 (Q3: -14.8% yoy), due to reviving domestic demand.
On a quarterly basis, economic activity soared 6.8% in Q4, following the previous quarter’s 5.1% increase.
GDP looks set for a robust rebound this year, following 2020’s slump. Recovering household and investment spending amid supportive fiscal and monetary policy stances should rekindle domestic activity, while external demand will benefit from the gradual reopening of economies. However, uncertainty over November’s general elections and the drafting of the new constitution remains in the background.