(Reuters) -Chile's economy experienced a slight expansion of 0.1% in the fourth quarter of 2023 compared to the previous quarter, according to data released by the country's central bank on Monday, a figure slightly below market consensus.
The Gross Domestic Product (GDP) of Chile, the world's most prolific copper producer, also witnessed a 0.4% year-on-year increase, surpassing the median forecast of a 0.2% rise.
The quarter-on-quarter GDP growth was driven by improvements in the personal services and transportation sectors. Conversely, a decline in mining activities partially offset the annual growth, the central bank reported.
Pantheon Macroeconomics' chief economist for Latin America, Andres Abadia, said, "In expenditure terms, private consumption and net exports saved the day, offsetting weakness elsewhere, highlighting the fragility of the recovery and the need for more rate cuts in the near term."
For the entire year of 2023, Chile's economy recorded a 0.2% expansion from the previous year. The central bank primarily attributed this GDP growth to positive contributions from personal services, EGA, and transportation. In contrast, the trade sector posed a significant downward impact on the 2023 GDP.
The Chilean central bank in December 2023 revised its forecast, predicting the country's GDP to remain flat for the year, a modification from its earlier prediction of a contraction of 0.5% to zero growth.
Abadia added that looking ahead, "Growth likely will gain traction on the back of enhanced domestic fundamentals, supported by the delayed impact of lower interest rates, low inflation and improving conditions for crucial exports."
In a bid to stimulate the economy, the central bank initiated a cycle of monetary easing in July 2023, with a larger-than-expected rate cut of 100 basis points. Subsequently, in January, the bank cut another 100 basis points, reducing the rate to 7.25%, indicating its perception of decreasing inflationary pressures.