Chile’s economy shrank 5.8% in 2020 due to pandemic: the worst drop in four decades

RIO DE JANEIRO, BRAZIL – The novel coronavirus pandemic, currently experiencing a second wave in Chile, caused the country’s gross domestic product (GDP) to contract 5.8% in 2020, the worst drop in four decades, since the 1982 crisis, the Central Bank reported on Thursday.

“The impact of the health crisis on economic activity was mainly evidenced in the second and third quarters, with contractions of 14.2% and 9%, respectively,” the Central Bank stated.

The activities most affected by the restrictions imposed by the pandemic were construction and services, including transportation, restaurants and hotels, while the only sectors posting growth were public administration, mining, financial services and communications.

Seasonally adjusted figures for the preceding quarter showed a 13.1% drop in GDP in the second quarter, followed by growth in the third and fourth quarters of 5.1% and 6.8%, respectively.

The recovery “was in line with the gradual lifting of health control measures, economic measures to support household income and the withdrawal of part of the pension funds,” the bank said.

From an expenditure perspective, the impact was mainly reflected in lower domestic demand, an effect partially offset by net exports. Domestic demand showed a drop in all its components, affected mainly by consumption (-7.5%) and, to a lesser extent, by investment or gross fixed capital formation (-11.5%).

The real gross national disposable income fell by 4.7% last year, while total gross savings amounted to 19.8% of GDP in nominal terms, composed of a national savings rate of 21.2% of GDP and indebtedness by the rest of the world at 1.4% of GDP, representing the surplus in the current account of the payment balance.

Trade surplus reached US$3.37 billion, as a result of an increase in exports due to higher copper prices, of which Chile is the world’s leading producer, said the Central Bank, targeting GDP growth in 2021 between 5.5% and 6.5%.

Chile grew only 0.9% in 2019, pulled down by the wave of anti-government protests and inequality that began in October that year, while in 2018 GDP grew by 3.7%.

With 905,212 infections and 21,816 deaths in a year, Chile has been plunged in a second wave since December, with daily figures similar to last June, when the pandemic was at its peak and the hospital network was on the verge of collapse, which has prompted authorities to impose further restrictions.

However, the vaccination rate is very positive, having completed a new stage of its plan ahead of schedule and preparing to immunize people aged between 50 and 59.

Source: El Pais

This article was produced by The Rio Times’ automated newsroom system. How we use AI · Report an error