(Bloomberg) — Chile’s economy expanded last year at the fastest pace on record, fueled by billions of dollars in emergency stimulus measures that the government is now withdrawing as the economy emerges from the pandemic and inflation accelerates.
Gross domestic product grew 11.7%, the highest level in central bank records dating back to 1961, according to data released on Friday. The economy will expand 1.8% in the first quarter of the previous year, due to the 2.2% median estimate of analysts reported by Bloomberg.
Chile boomed last year after one of the world’s fastest-moving COVID-19 vaccination drives fueled an economic reopening, while fiscal stimulus and a series of early pension withdrawals stoked demand from workers. consumers Retail trade was one of the first sectors to benefit, followed by the services sector. However, the growth outlook for this year is gloomier as the central bank is implementing a series of increased aggressiveness on interest rates and inflation is rising.
Political uncertainty could affect growth this year. On March 11, Gabriel Boric was sworn in as the youngest president in Chilean history and the most leftist head of state in 50 years. He has promised tax, labor and pension reforms and pledged to control public debt as the country drafts a new constitution.
Boric has also said that he opposes any attempts at further withdrawals from pension funds. Three rounds of withdrawals have pumped about $50 billion into the economy, fueling a surge in consumption of goods from cars to electronics while fueling inflation.
Although the previous Administration predicted that GDP will grow 3.5% in 2022, the new Finance Minister, Mario Marcel, told the local press on Thursday that these estimates are “not very plausible” and “are not consistent with the adjustment that should be made.” have the economy this year to control inflation.”
Consumer prices rose 7.8% in the year to February, well above the 3% target. Monetary policymakers have raised borrowing costs by 500 basis points since July and are expected to announce another assault on fines this month.
Chilean economy grows record 11.7% last year thanks to fiscal stimulus
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