Chile’s economy grows 18.1% in May, returns to pace of pre-pandemic levels – Central Bank

RIO DE JANEIRO, BRAZIL – Chile’s Central Bank has reported an 18.1% economic growth in May, which has brought it back to the pace of prepandemic levels.

“The level of activity before the pandemic has been recovered,” Central Bank President Mario Marcel announced. “If the level of activity before the social crisis of September 2019 is taken as a reference, it is likely that the level of activity will recover in a couple of months.”

Marcel described that ”what we see in terms of activity is that with the Imacec (Monthly Index of Economic Activity) figure for May we have recovered the level of activity we had in February 2020, that is, we have recovered the level of activity prior to the pandemic.“ He added that ”when we were making our projections at the end of last year, we thought it would happen in late 2021 or early 2022. Now it is happening in May 2021.”

He was also optimistic about a full-scale recovery in light of Chile’s high vaccination rate, with 70% of the population having completed either the two-dose or single-dose schemes.

The initial growth projections from 6% for this year have been corrected to between 8.5% and 9.5%. If for the remainder of 2021 Chile’s economy had zero growth, “we would have grown 7.5% compared to the year before,” Marcel explained.

He credited state aid in the Universal Emergency Family Income (IFE) for the successful review. ”In Chile, the monthly GDP is more than 24 billion dollars. By these measures, we are channeling 3 billion dollars a month for the next four months to the economy, so it is a huge effect that helps explain why we are projecting these significant growth rates.” But the high growth in May is also explained by the low base data from May 2020, when the economy sank in a pandemic context.

Imacec registered a rise of 2.6% in seasonally adjusted terms compared to April and a year-to-date advance of 17.3%. In fact, the increase in the seasonally adjusted Imacec was mainly explained by the performance of commerce. The production of goods increased 7.5%, explained by the performance of the manufacturing industry (15.3%) and, to a lesser extent, by the rise in other goods, which increased 8.2%. In this last item, the growth of construction stood out, while mining fell 0.3%.

Compared to the previous month, the production of goods expanded 0.2% due to “growth in the rest of goods and the manufacturing industry, an effect that was partially offset by the fall in mining,” the bank said. But commerce grew 51.3%, “driven by all its components” thanks to “the economic measures to support households and the partial withdrawals of pension funds.”

Therefore, seasonally adjusted figures show a growth of 13.4% compared to the previous month,” the agency added.

Chilean authorities have allowed three separate withdrawals of 10% of pension fund accounts, for people to cope with cash shortages following the sanitary restrictions on movement, which resulted in a positive outcome at the time but has left the most vulnerable sectors without pension savings for later in life.