SANTIAGO, Aug 18 (Reuters) – Chile’s economy shrank less than expected in the second quarter, beating both quarterly and annual forecasts, data from the country’s central bank showed on Friday.
Chile’s economy shrank 0.3% from the previous three-month period, better than the market consensus for a 0.6% contraction in a Reuters poll of economists.
Gross domestic product (GDP) in the world’s largest copper producer also shrank 1.1% on a yearly basis, the central bank added, beating an estimate of a 1.4% drop.
“The drop in GDP was influenced mainly by trade, transportation, mining and manufacturing activities,” the central bank said in the report.
The contraction was offset particularly by power generation, as well as electricity, gas, water and waste management, it added.
The quarter-over-quarter dip was largely due to a drop in trade, the central bank said, though a boost in mining partially offset the impact.
Chile’s economy has been adjusting in recent months after a rapid recovery from the COVID-19 pandemic, which caused strong inflationary pressures.
The Latin American nation’s central bank began cutting interest rates at the end of July with a 100-basis-point-cut, after holding the benchmark rate at 11.25% for nine months in a bid to bring inflation down.
However, inflationary stress has not been resolved, the central bank has warned.
Still, the latest fall in output could encourage more interest rate cuts, analysts said.
“This weakness should give the central bank more room to cut interest rates,” Capital Economics economist William Jackson said. “We think the policy rate will be lowered from its current level of 10.25% to 7.50% by year end.”
Source : Nasdaq