Chile's mining-driven economy grew a smaller-than-expected 0.1% in the last quarter of 2022, but broke a streak of three quarter-on-quarter declines to record 2.4% growth for the full year.
The Andean country, the world's top producer of copper, saw the economy shrink 2.3% in the fourth-quarter versus a year earlier, the first year-on-year drop since the start of 2021 when the country was being hit by the COVID-19 pandemic.
The year-on-year decline was the first one after six consecutive quarters of growth. Economists polled by Reuters expected a 1.6% drop in Chile's Gross domestic product between October and December. At the annual level, "the result was led by services, particularly personal, business and transportation services. In contrast, the production of goods exhibited a decline, with mining and manufacturing having the greatest impact on this result", the country's central bank said. "The growth of domestic demand in the first half of the year, driven by consumption, and its subsequent slowdown in the second half of the year, stood out," it said. In seasonally-adjusted terms, GDP grew 0.1% from the previous three months, less than the 0.6% increase expected by economists. The data shows that high inflation and a tight monetary policy "are taking a heavy toll on the economy," said analysts at Capital Economics.
Even with the reopening of China's economy improving the outlook for copper prices, Chile's top export, the country is expected to continue to struggle this year, Capital Economics said.
"All told, we think Chile's economy will contract by around 0.5% over 2023 as a whole." The quarterly increase was "led by an acceleration in mining and trade activities, an effect almost entirely offset by a drop in transportation", the central bank said. Domestic demand plummeted by 7.6% in the final quarter of last year, but was up 2.3% for the whole of 2022. Last year's current account registered a deficit of $27.102 billion, equivalent to 9.0% of GDP, the central bank said. "The result was explained by the income from foreign investment in Chile and the deficit in the services trade balance; meanwhile, the goods trade balance was positive," it said. (Reporting by Fabian Andres Cambero; Editing by Steven Grattan, Tomasz Janowski and Ed Osmond)
