Chile's central bank raises predictions for 2021 growth, inflation

SANTIAGO: Chile's economy will grow faster than previously predicted this year, the central bank said in its Ipom quarterly economic report, buoyed by the injection of a fresh round of stimulus and the passage of a third withdrawal from private pension funds.

The bank said gross domestic product would increase by 8.5% to 9.5% in 2021, up from its previous prediction in March of 6% to 7%.

"The higher growth in 2021 will more quickly close the gap in activity generated the Covid-19 crisis, making monetary stimulus less necessary to support the recovery of the economy," the bank said in the report.

The bank on Tuesday announced it would hold its benchmark rate at 0.50% - the lowest in a decade - but suggested a change could come sooner than anticipated as recovery gains steam.

Chile's government has launched several major stimulus packages since the start of the year, and lawmakers in late April approved a bill allowing citizens a third opportunity to withdraw 10% of savings held in privately held pension funds. The country is also among the world leaders in vaccinating its citizens.

The bank predicted consumer prices would rise 3.9% in 2021, compared to a previous forecast of 3.4% for the year.

The economic impact of restrictions during a second wave of coronavirus following the southern hemisphere summer had been less severe than anticipated, the bank said.

Chile, the world's top copper producer, will also ride tailwinds from rising prices for the metal, which the bank forecast at $4.25/lb in 2021. Copper accounts for around half of Chile's exports.