COVID saves Chile’s economy

Chile’s economy beat expectations in the second quarter as billions of dollars in fiscal stimulus triggered a retail sales frenzy during the pandemic, Report informs referring to Bloomberg.

Gross domestic product grew 1 percent from the first quarter, more than the 0.7 percent median estimate from analysts in a Bloomberg survey. The economy expanded 18.1 percent from a year prior, the central bank reported on Aug. 18.

Chile has spent more to offset the economic impact of the pandemic than any other key emerging-market country, according to the International Monetary Fund, while a series of early pension withdrawals has put almost $50 billion in people’s pockets. That cash has fueled a consumption boom, with retail sales posting eye-popping year-on-year gains of 66 percent in June and 72 percent in May.

The stimulus also helped to offset the economic blow of strict lockdowns and longer nightly curfews implemented by the government to battle a record surge in virus cases during the second quarter. Going forward, growth is expected to speed up as the vaccination campaign drives down infections while the economy slowly reopens.

Mining increased by 3.1 percent from the first quarter, according to the central bank. Internal demand rose 1.6 percent, driven by household consumption of durable goods.

The South American country will see GDP expand by as much as 9.5 percent this year, according to the central bank. On top of that, lawmakers are debating new pension drawdowns, which may add even more impetus to economic growth.

Prospects of a stronger recovery prompted policymakers to start raising key interest rates last month. Chile traders surveyed by the monetary authority expect borrowing costs to rise to 2.25 percent in a year from 0.75 percent currently.