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We still expect a 2.4% 2024 GDP growth, but with an upside bias.
2024/05/20 | Andrés Pérez M., Vittorio Peretti & Ignacio Martinez Labra

According to the BCCh's national accounts, the economy's GDP rose by 2.3% YoY in 1Q24, slightly below the 2.5% indicated by the monthly GDP proxy. Sequentially, GDP increased by 1.9% from 4Q23 to 1Q24, accelerating from the 0.1% increase in the previous quarter. Dynamics at the margin were lifted by total consumption, where both components rose: private consumption (+1.1% QoQ/SA, 0.7 p.p. of contribution) and government consumption (+4.7% QoQ/SA; 0,7 p.p. of contribution). In contrast, gross fixed investment contracted by 0.1% QoQ/SA, with both components falling slightly, appearing to stabilize after steeper contractions in 4Q23. Considering the new data, the carryover effect for this year's annual GDP was revised down by 10bps; if GDP remains constant at the end of March's level, 2024 GDP growth would reach 2.2%.



As expected, consumption was the main driver of activity in the quarter from the demand-side, while mining was so on the supply side. Private consumption increased 0.6% YoY in 1Q24, the first positive print since 2Q22 (-2.5% in 4Q23), with durable goods falling by 3.2% (-9% in 4Q23), but with non-durables growing 0.4% (-4.8% in 4Q23), and services increasing by 1.4% (+1% in 4Q23). Government consumption increased by a robust 4.3% (+0.4% in 4Q23). Gross fixed investment contracted 6.1% YoY (-5.7% in 4Q), with machinery and equipment falling 13.1% and construction down 1.5%, consistent with overall weakness of these components. Exports increased 3.2% YoY, while imports grew 1.6% YoY, resulting in a mild negative net export contribution (-0.12pp). On the supply-side, activity was pulled up by mining (+7% YoY; +0.9 p.p. of contribution), where the good performance in copper mining was explained by better ore grades and the start-up of a new concentrator plant, while non-metallic mineral extraction was driven by lithium carbonate. At the same time, transports (+7% YoY; +0.4 p.p. of contribution) and EGA (+18% YoY; +0.4 p.p. of contribution) also contributed to the annual gain. At the margin, activity increased 7.8% QoQ/SAAR in 1Q24 (+0.4% in 4Q23).


Our take: Today’s data confirms the strong start to the year, albeit supported by certain transitory factors (0.1pp calendar effect, frontloading of fiscal spending). While revisions in national accounts led to a slight revision to the statistical carryover to this year’s GDP to 2.2%, our 2.4% 2024 GDP growth call still has an upside bias. We expect the Central Bank's Board to cut the policy rate by 50bps to 6.0% in the May 23rd Monetary Policy meeting, followed by smaller 25-bps moves to 5.25% thereafter.