Chile GDP grows 11.7 percent amid pandemic recovery

2021 GDP growth was the highest in three decades, registering 11.7 percent. Growth came on the back of household consumption and government spending. State aid during a pandemic year also helped boost demand.

Chile’s economy grew 11.7 percent last year, the fastest rate in three decades, according to a Central Bank report from Mar. 18. In 2020, GDP contracted 5.8 percent.

Previously, the Central Bank projected 2021 growth of 11.5-12 percent.

The growth came on the back of relaxed pandemic measures and partial reopenings. Also, households and companies gradually adapted to the economic context created by the health crisis. 

Government spending increased, mainly related to public education, supporting remote learning and a gradual return to in-person classes.

Other consumption-sustaining measures included emergency income cash transfers and private pension fund withdrawals, while businesses benefited from subsidized loans and early tax returns. “Domestic demand remained dynamic throughout the year, driven by the performance of household consumption; investment also contributed to the result, exhibiting a recovery in 2021,” the report said.

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The tourism and hospitality sectors registered highest growth, but were also among the hardest hit by lockdowns and mobility restrictions. Transport and construction also grew solidly. Mining was the only sector that contracted, although activities did not cease during the pandemic. 

Imports grew 31.3 percent year-on-year while exports fell 1.5 percent, creating a trade deficit of US$20.3 million. “Cars and cargo vehicles, technological products, machinery for industrial use and household goods stood out among imports. On the export side, the drop in copper shipments contributed most to the result,” the report said.

Year-end inflation reached 7.2 percent, the highest in 14 years, prompting the Central Bank to raise the benchmark rate from 4 percent to 5.5 percent.

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