Economic performance in Chile disappoints with an annual growth of 0.1%.

The Chilean economy has shown disappointing performance in June, according to a recent report from the Central Bank, which highlights a mere 0.1% increase in the Monthly Economic Activity Indicator (Imacec) in annual terms. This figure is significantly below analysts' expectations, who had forecasted growth between 1% and 2%. The situation is even more concerning when considering that, excluding the mining component, the indicator reflects a decrease of 0.7%, making the prospect of economic recovery increasingly complex. Economist Óscar Landerretche, a faculty member at the University of Chile, has pointed out that these numbers are a bad sign that could force a downward revision of economic projections. Landerretche, in an analysis published on his X account, warns that despite the negative figures, the arithmetic nature of the comparison could contribute to a slow recovery, although the path appears to be fraught with obstacles. The economic context in Chile has been complicated since the severe inflationary shock that reached 14.1% annually in August 2022. Despite the implementation of restrictive monetary policies to stabilize the situation, the economy is still in a very gradual recovery phase. These efforts seem insufficient to lead the Chilean economy toward robust growth, as evidenced by recent indicators. The Central Bank meeting, which took place a day before the publication of the Imacec, resulted in the decision to maintain the Monetary Policy Rate (TPM) at 5.75%. This occurs in a context where the economy has evolved below expectations, and inflation is drifting away from the 3% annual target, primarily driven by rising electricity costs. Despite the disappointing annual data, the Imacec showed a 0.3% increase in June compared to the previous month. This slight improvement is mainly attributed to growth in the mining and commerce sectors. However, the services sector has shown notably negative performance, with declines both in annual and monthly terms, reflecting the precariousness of the recovery. In particular, personal services, including education, faced a decline of 1.8% compared to the previous year. This drop is explained by the anticipation of winter vacations and the suspension of classes in June 2024, a factor that has directly impacted economic activity. The Central Bank indicated that the production of goods experienced an annual increase of 2.2%, primarily driven by the mining sector and the production of other goods. However, the industrial sector was negatively affected due to lower food production, reflecting the difficulties the economy faces on various fronts. In the commerce sector, a notable annual increase of 4.3% was recorded, highlighting both retail and wholesale trade. The Central Bank reported that sales in large stores and specialized establishments for clothing, footwear, and household equipment were the main drivers of this growth. Meanwhile, wholesale trade also contributed with higher sales of household goods and machinery. The economic outlook has raised concerning reactions among business sectors. Ricardo Mewes, president of the Confederation of Production and Commerce (CPC), stated in a recent interview that the situation is clearly negative. Mewes emphasized the lack of investment incentives, pointing out that aspects such as sectoral permits are not generating the necessary conditions to foster economic growth. The Ministry of Finance, led by Mario Marcel, has also adjusted its projections in its Second Quarter Public Finance Report, lowering the growth estimate for 2024 from 2.7% to 2.6%. Additionally, it is warned that inflation for this year will end up above 4%, a phenomenon largely attributed to the increase in electricity rates. In light of this complex scenario, the Chilean economy faces significant challenges that require attention and effective actions. The combination of meager growth, persistent inflation, and lack of investment incentives presents a challenging outlook for the country's economic future, necessitating strategic and coordinated decisions from both the public and private sectors to reverse this negative trend.