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Coronavirus thumps Chile's economy as darker data expected for May

Bnamericas Published: Monday, June 01, 2020
Coronavirus thumps Chile's economy as darker data expected for May

Chilean economic activity data for April was grim – activity plunged 14.1% year-on-year, the biggest monthly drop on record and worse than what economists had expected.

A drop of around 10% had been forecast. An even steeper fall is expected for May, when economic engine room Santiago went into full lockdown amid a spike in infection rates.

In April, mining posted a 0.1% contraction as the non-mining section of the economy nosedived 15.5%, according to central bank data.

“For May, greater deterioration of the economy is expected, with hikes in unemployment,” said economy minister Lucas Palacios in a tweet.

The research unit of Santander Chile also forecasts a steeper drop, of around 15%, although activity in some sectors could have already hit rock bottom. Analysts at local financial services player Grupo Security are also expecting a contraction of about 15%.

Chile avoided a technical recession in the first quarter, thanks to the mining sector. A rebound is expected in Q3.

Palacios, meanwhile, alluded to the importance of following social distancing rules. Chile was ranked poorly in this regard in a recent study. 

“The quicker we practice self-care, the sooner the sun will rise so that we can reboot the economy step by step,” Palacios told broadcaster Radio Duna. 

President Sebastián Piñera has called for a national accord between the government and the opposition. The government does not have a congressional majority.

Chile’s economy – already sputtering following the social unrest of last year – has been hit by plunging demand stemming from sanitary measures such as mall closures as well as by weaker commodity prices.

Meanwhile, the association of metal products manufacturers Asimet said the sector contracted only 1.1% in April. Asimet chief Dante Arrigoni said, “companies have, for some time, operated in difficult conditions and for that reason we know how to react to adversity.”

He said metals firms had adapted quickly and implemented the requisite sanitary measures. Arrigoni renewed a long-standing call for policies to spur the country’s industrial sector, citing its importance for creating “more and better jobs.”

Over the first four months of the year, the sector grew 4.6%, down from 6.6% in the first quarter. A contraction is expected for the full year.

Construction chamber CChC chief Patricio Donoso – also expecting a darker May – cited the importance of advancing labor-intensive projects, increasing public investment and boosting confidence to spur private investment.

Picture credit: Chilean mining ministry

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