Chile’s Economy Posts Back-to-Back Drops as Recovery Dims

(Bloomberg) -- Chile's economic activity dropped for the second straight month, adding to evidence that the recovery is losing steam in one of Latin America's richest nations. 

The Imacec index, a proxy for gross domestic product, fell 1% on the month in January, the central bank reported Tuesday. Activity climbed 9% from a year ago, well below the 10.7% median estimate of analysts surveyed by Bloomberg.

Chile's economy is facing headwinds after surging near 12% in 2021. The central bank has raised its interest rate by 500 basis points since July to tame inflation, and policy makers say more price pain is coming amid the conflict in Ukraine. Uncertainty is also high amid the drafting of the new constitution.

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Economic activity was boosted by services, which expanded 17% from the year prior. On a monthly basis all sectors except for services contracted, with mining down by 0.8%.

“Overall, Chile's economy continues to lose momentum, on the back of high inflation, tighter financial conditions, and slower fiscal stimulus,” Andres Abadia, chief Latin America economist at Pantheon Macroeconomics, wrote in a note. “These drags, in additions to challenging external conditions, likely will continue to weigh on the economy in the very near term.”

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