Chile: GDP records sharpest contraction since Q2 2020 in the third quarter
November 18, 2022
GDP declined 1.2% on a seasonally adjusted quarter-on-quarter basis in the third quarter, contrasting the 0.1% expansion logged in the second quarter. Q3's reading marked the worst reading since Q2 2020. As such, activity continues to normalize following double-digit, stimulus-fueled growth in 2021.
Household spending fell 0.8% in the third quarter, which was above the second quarter's 2.4% contraction. Public consumption dropped at the sharpest pace since Q2 2021, contracting 4.2% (Q2: -2.4% s.a. qoq), as the new government opted for fiscal prudence in order to shore up investors’ confidence and tame public debt. Meanwhile, fixed investment growth improved to 4.7% in Q3, from the 0.4% expansion logged in the previous quarter.
On the external front, exports of goods and services growth slowed to 0.1% in Q3 (Q2: +1.3% s.a. qoq). In addition, imports of goods and services contracted at a quicker pace of 6.5% in Q3 (Q2: -1.9% s.a. qoq).
On an annual basis, economic growth waned markedly to 0.3% in Q3, compared to the previous period's 5.6% expansion. Q3's reading marked the slowest growth since Q1 2021.
Looking forward, the economy is expected to continue to contract in quarter-on-quarter terms in Q4 2022 and Q1 2023, due to tight monetary policy, weakening economic momentum abroad and uncertainty over constitutional reform and the government’s policy agenda dampening investment.
Author: Oliver Reynolds, Economist