Confirming the bleak outlook for the Chilean economy hit by the coronavirus crisis, the Central Bank worsened its projections by estimating a 2020 slowdown between -5.5% and 7.5%, representing the hardest contraction in 35 years.
The data, as referred to in the June Monetary Policy Report, represents a reversal from previous estimates, given that in its April report, the issuer had anticipated a drop of between 1.5-2.5% in activity for this year.
In particular, the picture is even more serious is the coming months, in line with the historic fall of -14.1% of April’s Imacec. And while the report states that “the economy will begin to recover in the second part of 2020, it will not yet reach activity levels comparable to those of the beginning of the year”.
The report was a new bucket of cold water for the government. “We fell short with the projections. The second quarter will be for oblivion,” said Finance Minister Ignacio Briones interviewed at Radio ADN.
According to the head of the fiscal wallet, the figures prove that we are going through a “severely complex period where we are going to have a significant economic downturn.”
In addition, he assumed that both the Central Bank and we had fallen short of the projections we had made months ago.”
Other facts
Other worrying data from the Central Bank’s IPOM is that investment would plummet -15.9% this year and domestic demand would drop 10.4% (5.8% prior).
The positive: inflation would rise by only 2% in 2020 and by 2021 the central bank projected a larger-than-expected recovery, with growth between 4.75 and 6.25%.
The report is then known that on the eve, at its monthly monetary policy meeting, the issuing institute’s board decided to keep the interest rate at historic lows. But further, assuming that we are in a scenario where it assumes that “the effects of the Covid-19 pandemic have continued to prolong and intensify”, the instance decided to activate new stimulus measures totaling US$24 billion.
The measures include a $8 billion asset purchase and a second stage of a $16 billion bank financial line for “bank credit delivery to small and medium-sized enterprises.”
