Chilean government raises GDP growth forecast for 2021 to 7.5%

RIO DE JANEIRO, BRAZIL – The Chilean government raised this Monday (12) its Gross Domestic Product (GDP) growth forecast for 2021 from the 6% estimated in April to 7.5%, mainly due to the progress of vaccination, the recovery of the world economy, and the price of copper, of which Chile is the world’s leading producer.

The improvement is also explained by “the additional fiscal impulse approved in recent months, as a result of the extension of the economic and health crisis,” indicated the Ministry of Finance, which recalled that direct transfers to Chilean families would reach US$23 billion this year.

“As has been recognized by different international organizations, the fiscal effort implemented in our country has been very significant,” it added.

The Executive’s forecasts are higher than those of the World Bank (6.1%) and the International Monetary Fund (6.2%), but lower than those of ECLAC (the Economic Commission for Latin America and the Caribbean – 8%) and the Central Bank of Chile (between 8.5% and 9.5%).

In either case, this is a significant rebound from the sharp drop of -5.8% recorded in 2020, the worst figure in 40 years.

The government also projects an increase in domestic demand from the 10.7% estimated in April to 12.6%, and an average copper price of US$4.11 per pound, compared to US$3.99 per pound three months ago.

With 28% of world production, Chile is the world’s leading exporter of copper, which is fundamental in energy transmission. May 10 reached its historical maximum by registering a price of $4.86 per pound, surpassing the records of the 2011 “supercycle”.

In addition, actual Central Government revenues are projected at US$55.1 billion (23.4% of GDP), which implies a 33.5% real growth with respect to 2020 and a 4.3% improvement with respect to the previous estimate.

Meanwhile, the increase in Central Government spending will reach $71.9 billion this year (30.5% of GDP), which implies a growth of 27.3% in real terms with respect to 2020 and 16.9% over what was forecast three months ago.

On the other hand, the fiscal deficit will be -7.1% of GDP, and the gross debt of the Central Government will be 34.1% of GDP, compared to 33 % in April.

With 1.58 million infected and 33,877 deaths since the beginning of the pandemic, Chile left behind a second wave that led the authorities to confine a large part of the territory between April and June.

In parallel, the country has deployed one of the most successful vaccination processes in the world. More than 70% of the target population (16 out of 19 million inhabitants) has received the full vaccination regimen.