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Chile's economic activity posts largest increase since mid-2022

Published 04/01/2024, 07:17 PM
Updated 04/01/2024, 07:20 PM

SANTIAGO (Reuters) - Chile's economic activity index posted its largest year-on-year increase in almost two years in February, central bank data showed on Monday, reinforcing its positive momentum after a major beat in the previous month.

Economic activity in the world's largest copper producer was up 4.5% in February from a year earlier, the central bank said, the most since May 2022, when it had risen 5.1%.

All activities surveyed by the monetary authority had a positive performance in the month, with mining and services - especially transportation - among the highlights.

A number of independent analysts had already pointed out last week that economic activity growth of more than 4% in February was on the cards after sectoral statistics confirmed a good start to the year for the Andean country.

The result, however, still came in as a surprise for analysts polled by the central bank, whose median forecast for activity in February stood at a 1.5% expansion, according to a poll released last month.

The data comes after Chile's economic activity rose by a revised 2.3% year-on-year in January, overshooting market estimates.

The Monthly Economic Activity Indicator (Imacec), which represents about 90% of gross domestic product (GDP), was also up 0.8% in February from the previous month.

"In all, the momentum of both ex-mining and mining activity has clearly outpaced our expectations," JPMorgan economist Diego Pereira said, noting that accommodative fiscal policy and less restrictive monetary policy have provided a boost.

"The question is whether mining would be able to consolidate this level, gain further, or drop in a similar manner to what happened in the prior two years."

© Reuters. FILE PHOTO: Chile's President Gabriel Boric listens a question at La Moneda government house in Santiago, Chile, March 8, 2024. REUTERS/Ivan Alvarado/File Photo

Chile faced a sharp economic downturn in 2023 after a rapid post-pandemic recovery. The economy struggled while consumer prices soared, leading the central bank to hike interest rates which it has now been cutting as inflation cooled.

The latest rate cut came in January, when the bank reduced borrowing costs by 100 basis points. The monetary authority's rate-setting committee will meet again this week and is expected to deliver a 75-basis-point rate cut to 6.50%.

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