The swift vaccination process and the price of copper are among the factors that have led several multilateral agencies, consulting firms and investment banks to improve their growth forecasts for the Chilean economy this year.
While economically speaking 2020 is a year best forgotten, Chile is currently on track for an economic rebound due to the COVID-19 vaccination process – with over 7 million people having received at least one dose – and the improved outlook for the price of copper. This has been confirmed by at least five international entities that have improved their forecasts for Chile over the past few weeks.
During the last week of March, the World Bank released its “Renewing with Growth” report, which offers a much more encouraging overview for the region for this year and increases its projected growth rate for Chile from 4.2% to 5.5%. The reasons for this improvement include China’s economic recovery and the resulting rebound in commodity prices. The price of Chile’s main export, copper, has remained at record levels above US$4 per pound for most of the year.
Meanwhile, this week the International Monetary Fund (IMF) improved its forecast for Chile’s 2021 GDP growth for the third time this year. In October 2020, it anticipated growth of 4.5% for 2021, but has improved its outlook for the country three times since January. The January update increased it to 5.5%, the February report boosted it to 6%, and this week the entity increased the rate again to 6.2%.
The IMF’s projection exceeds the 6% increase that the OECD expects to see from Chile.
These new IMF estimates suggest that our country would also be the first in Latin America to return to pre-health crisis levels, which could happen towards the end of this year.
The bank Credit Suisse also improved its growth estimate from 5.5% to 6.8% recently, mainly due to the rapid implementation of the vaccination process and other factors, such as the price of copper and monetary policy stimulus. The bank considers the fact that 80% of the population will be vaccinated by mid-year – as the government anticipates – as a major accomplishment and states that the progress made in this area reflects the country’s institutional strength.
According to Chilean government projections, 9 million people will have received at least one dose of vaccine by May 15 and over 7 million will have received both. Chile’s vaccination process has been recognized as one of the fastest in the world at the international level by various media outlets and initiatives, such as Oxford University’s Our World in Data.
But these projections all fall short of the 9% growth forecast for this year by the British consulting firm Capital Economics, largely due to Chile’s vaccination campaign. “The government is on the way to achieving its goal of fully vaccinating 80% of the population by the end of the second quarter, which would allow the majority of the restrictions to be lifted and for recovery to accelerate by the end of this year,” Capital Economics estimates.
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