Chile’s Economic Performance in Q4 2024: Growth Exceeds Estimates

In the fourth quarter of 2024, Chile’s GDP growth slowed to 0.4%, down from 1.5% in the previous quarter, but annual growth reached 4.0%, surpassing expectations. Full-year growth for 2024 was 2.6%, exceeding central bank projections, driven by strong exports and resilient domestic demand, amidst ongoing inflation issues.

In the fourth quarter of 2024, Chile’s economy decelerated, although it showed a better performance compared to the previous year and exceeded growth estimates for the full year, according to data released by the central bank. This information emerges ahead of an upcoming interest rate-setting meeting where it is anticipated that borrowing rates will remain at 5.0% amidst persistent inflation concerns.

Chile, recognized as the world’s largest copper producer, experienced a gross domestic product (GDP) growth of 0.4% in the fourth quarter from the preceding quarter, slightly shy of the 0.5% predicted by economists. The growth in GDP was a decrease from the 1.5% experienced in the prior quarter due to diminished mining activity; however, this was counteracted by increased service and agricultural productivity.

Kimberley Sperrfechter from Capital Economics noted, “More timely monthly activity data suggest that the economy headed into 2025 with more momentum. This, combined with above-target inflation, means that the central bank is likely to stand pat on Friday.”

On an annual scale, Chile’s economy demonstrated a 4.0% growth in the fourth quarter, surpassing the expected 3.7% growth as per the Reuters poll. Following a weak 2023, Chile regained economic momentum propelled by interest rate reductions. A pause in the easing cycle occurred in January, following a total of 625 basis points reduced since July 2023 due to inflationary pressures.

Overall, the Chilean economy grew by 2.6% in 2024, primarily driven by exports, while internal demand saw an increase of 1.3%. This full-year growth not only exceeded the central bank’s December estimate of 2.3% but also marked a significant upturn from the previous year’s 0.5%, representing the highest expansion since the post-pandemic recovery in 2021.

Andres Abadia, chief Latin America economist at Pantheon Macroeconomics, remarked that Chile completed the year on stable ground with resilient domestic demand, suggesting potential for accelerated growth in the current year driven by strong private consumption. Nonetheless, Abadia cautioned that “risks remain tilted to the downside, given volatile external conditions and still-tight financial constraints, with policymakers having little room for maneuver in the near term.”

The Chilean government has projected a GDP growth of 2.5% for the current year, while average inflation is estimated at 4.7%, remaining above the official target range of 2% to 4%.

In summary, Chile’s economy exhibited a slowdown in the fourth quarter of 2024 but performed impressively compared to the previous year, resulting in a full-year growth that surpassed prior estimates. The central bank is expected to maintain interest rates in light of ongoing inflation concerns. Despite positive indicators, risks persist from volatile external conditions and financial constraints, calling for caution among policymakers as they navigate the post-pandemic landscape.

Original Source: money.usnews.com