(Bloomberg) — Chile’s economy contracted less than forecast in March from the month earlier as service industries remained resilient, backing up the central bank’s insistence on keeping interest rates at an over 20-year high.
(Bloomberg) — Chile’s economy contracted less than forecast in March from the month earlier as service industries remained resilient, backing up the central bank’s insistence on keeping interest rates at an over 20-year high.
The Imacec index, a proxy for gross domestic product, fell 0.1% in the month, less than the -0.4% median estimate of analysts in a Bloomberg survey. From a year prior, activity declined 2.1%, more than the forecast of a 1.7% drop, the central bank reported on Tuesday.
Chile’s economy has held up better than expected in recent months despite headwinds including above-target inflation, tight monetary policy and falling liquidity. In April, the central bank raised its estimates for inflation while also opening up the possibility that gross domestic product may expand this year. Put together, they indicate little chance of a borrowing cost cut before July.
Read more: Chile’s Costa Dismisses Early Rate Cuts, Even as Inflation Slows
Services rose 0.9% on the month in March, while non-mining activity gained 0.2%, the central bank said. On the other hand, both mining and commerce declined 1.8% during the period.
“Non-mining activity has proven to be resilient, which should keep the central bank conservative in its calibration of monetary policy,” Goldman Sachs Group Inc. economist Sergio Armella wrote in a note.
Policymakers won’t cut rates until underlying inflation is on a clear downward trend toward the target of 3%, central bank chief Rosanna Costa said in an interview last month. It was 11.1% in April.
President Gabriel Boric rolled out a plan in April to develop the local lithium industry, with the government taking a controlling stake in future public-private partnerships in the largest brine deposits. It’s part of efforts to seek a bigger role for the state, while also attracting more private capital.
Still, critics such as Canadian mining billionaire Robert Friedland said the initiative will deter local investment and may hurt the clean energy transition.
Chile’s central bank will publish its first-quarter GDP figures on May 18.
–With assistance from Rafael Gayol and Giovanna Serafim.
(Updates with details from data release starting in second paragraph, economist quote in fifth)
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