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The economy showed greater resilience during the latter part of 2022

Andrés Pérez M., Vittorio Peretti & Ignacio Martinez Labra


The monthly GDP proxy (IMACEC) fell 1.0% over twelve months in December (2.5% drop in November), with non-mining activity surprising positively. The 1.0% yoy decline was milder than the Bloomberg market consensus of a 2.0% drop and our 1.8% call. Activity increased 0.4% from November to December (SA), partly offsetting the 0.75% drop recorded previously. Non-mining activity rose sequentially, by 0.5%, the first positive print since August, with widespread sequential gains (services: +0.8% mom/sa; commerce: 0.2% mom/sa). Overall, the Chilean economy grew 2.7% in 2022 (11.7% in 2021), well above the central bank’s 2.4% forecast in the December IPoM (EEE: 2.5%). While there are more evident signs of the disinflation process consolidation (to be further aided by CLP dynamics this year), and medium-term inflation expectations gradually retreating towards the 3% target, more resilient activity, a still-wide CAD, still-high inflation and domestic policy uncertainties will favor a cautious approach by the Board. In this context, a rate in the short-term is unlikely.

The economy contracted 1.6% year over year during the final quarter of last year. GDP growth was down from +0.3% in 3Q and +5.6% in 2Q22. Non-mining activity declined 1.7% (+1.1% in 3Q and 7.2% in 2Q). Services (excluding commerce) was the only component to post an annual increase, but its pull diminished (+1.1% yoy in the quarter versus 4.6% in 3Q and 11.5% in 2Q). The drag from commerce eased to 8.4% contraction (9.6% drop in 3Q22), while manufacturing contracted 5.5% (3.9% drop in 3Q).

At the margin, activity expanded in the last quarter of 2022. Activity increased 2.5% qoq/saar, from a 5.5% decline in 3Q (-0.2% in 2Q and -1.9% in 1Q). Non-mining activity increased 0.5% qoq/saar (-4.3% in 3Q; -1.9% in 2Q).

The outlook for activity remains downbeat as business sentiment sits near lockdown levels. Think-tank ICARE’s business confidence survey for January showed sentiment remained deep in pessimistic territory. Excluding the volatile mining component, business sentiment ticked up to 35.9 points (50 = neutral), completing a full year in pessimistic ground. Construction sentiment remains the key drag amid low demand and unfavorable economic outlook.

The economy showed greater resilience during the latter part of 2022, but the effects of tightening macro policies, high inflation, and weak private sector sentiment will likely mean the recovery is transitory. For 2023, we see a 1.1% contraction, amid slowing global growth, elevated uncertainty and restrictive global financial conditions, in addition to the tight monetary policy and weak sentiment.

Andrés Pérez M.

Vittorio Peretti

Ignacio Martinez Labra