In early December Chile's central bank said the country's economy was set to contract between 1.75% and 0.75% in 2023, however in 2022 GDP is seen rising 2,4%, with a formidable takeoff in the first half of last year.
But now numbers collected by the National Stats Office, INE are showing the deterioration of the Chilean economy, with industrial production contracting 5% last November for the sixth month running while consumption is down 9,2%. This means November will record an annual drop of at least 2%, third month running.
Even when the resilience of economic activity in previous months would help a 2,5% growth this year, head winds are becoming more serious, both locally and overseas, which will reflect in a 1% drop in 2023, according to Rodrigo Cruz, Santander Bank economist.
Sector info is showing negative in November in the whole spectrum, with a strong deceleration, expected to continue this year, 2023, in an adverse international context and a domestic economy still going through an adjustment process, said economist Felipe Ramirez. November is showing an annual contraction of 2%, for the first time since February 2021, which will have an impact on employment in the first half of 2023.
Overall, ”consumers and homes have less liquidity, credit is more restricted, the labor market has lost dynamism and inflation remains too high, with no prospects that this November situation is again repeated in December (2022)
Jorge Selavie from Scotiabank is more pessimistic, November will show a 3% contraction, based on INE data, which means a scenario with many black clouds ahead for the Chilean economy”.
The Chilean central bank anticipates inflation next year will average 6.6%, ending the year at 3.7%, after having reached almost 13% in 2022. Likewise with the price of copper, Chile's main export averaged US$ 4 a pound this year but is estimated to end 2023 at US$ 3,55. In effect the red metal ended 2022 trading at US$ 3,8042, grade A, while at the last session in 2021, a year ago, it reached US$ 4,4067 the pound.
2022 was also extraordinary in the money exchange market, since the US dollar volatility broke several records in Chile having reached over 1,000 Pesos and forcing the Central Bank to intervene. (14 July 1,046 for a greenback) Political instability in Chile together with the constitutional reform debate, finally rejected, helped prop the US dollar to higher values. The US dollar currently trades at 870 Pesos in the open market in Chile.