The economy grows less than expected in the first quarter and analysts say the slowdown will worsen in the second part of the year

The economy is finally giving up on the high growth numbers it saw in 2021. Thus, first-quarter GDP expanded by 7.2%, seven-tenths less than the initial close (of 7.9%) after knowing the March Imacec index, the least progress since January-March 2021 , as revealed by the national accounts of the Central Bank (BC).

According to the issuing institute, the decline in activity growth is mainly due to the updated status indicators and the reconciliation process between the supply and use schedules of the quarterly national accounts.

The main objective of national accounts is to present, in a concise and coherent manner, the flows of production, consumption and accumulation that occur in a country. All this within a certain period of time. It is more complete information than the monthly Imacec, because it includes the development of the main variables of economic activity.

Anyway, with this 7.2% growth, Chile ranked ninth globally, out of the 27 countries that reported their numbers, according to Bloomberg. Portugal ranked first, with a quarterly expansion of its economy of 11.9%, followed by Israel with 9.6% and the United Kingdom with 8.7%. As for Latin America, it is second only to Colombia, which recorded an increase in GDP by 8.2%.

In detail, British Columbia reported that domestic demand increased 13% driven by household consumption, which in turn grew by 13.9%. This number is lower than what has been observed in the past three quarters. Spending on services stood out for its contribution, particularly those related to health, restaurants, hotels, transportation, non-durable goods, clothing and fuel. Meanwhile, consumption of durable goods increased, driven by the purchase of automobiles and, to a lesser extent, the purchase of furniture.

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Similarly, investment grew by 8.8% driven by its two components. The first, investment in machinery and equipment, the results of which reflected a greater investment in machinery for industrial use and freight vehicles, with trucks and vans highlighted. While investment in construction and other works was determined by the increase in housing construction and, to a lesser extent, by the revitalization of mining-related investment projects.

With regard to foreign trade in goods and services, the report of the governing body states that “exports fell 1.4% and imports increased 17.5%.” In the first case, the result was mainly explained by the lower copper and fruit charges. Meanwhile, imports and exports of machinery, equipment, fuel, and clothing were marked.

Similarly, total savings amounted to 27.4% of GDP in nominal terms, made up of national savings of 20.5% of GDP and external savings of 7% of GDP, corresponding to the balance of payments current account deficit. And the real GNI grew by 9.6%, which is a greater increase than that observed in the GDP, due to the improvement in terms of trade.

8 April 2022 / Ornoa Photo: Diego Martin / Agenciaño

Economists stress in the quarter figures that consumption is what continues to drive activity, mainly due to the maintenance of significant liquidity in families and businesses. However, they stress that this lower-than-expected growth is accelerating the slowdown in the economy and most expect it to intensify from the start of the third quarter, although the numbers in the second quarter will be lower than the current growth.

Rodrigo Cruz, an economist at Banco Santander, notes that “the pace of the slowdown is within expected margins. Although the variance is a quarter to a quarter lower than that inferred from Imacec, expectations were in a seasonally adjusted contraction, so the explanations remain without major surprises.” .

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While Martina Ogaz, Economist at Euroamerica, commented, “The national accounts figures published today show that investment is slowing down much faster than consumption. I think the latter was a surprise, because it is very likely that consumption will return to normal much more slowly given the high liquidity that It is still present in the economy as a result of pension fund withdrawals and erratic financings, and where private consumption primarily stands still, ultimately adding an upward bias to our GDP growth estimates for this year.”

When is the slowdown strongest? Francesca Perez, chief economist at Bci, confirms that “the slowdown in the economy has already begun with a quarterly decline of 0.8%. We expect these declines to continue for another three quarters.” It also indicates that we should see a decrease in annual variations from the third quarter.”

Cruz notes that “the economy in seasonal terms will decline quarter by quarter throughout the year, but we expect the biggest contractions during the second half. So, annual growth will continue to be strong during the first half, but this is due to the still low comparison base.” .

Ojaz notes that “from June onwards, we should see that the numbers slow down significantly, affected by the important base of comparison and the health crisis that has remained contained”

For Fernando Suarez, Senior Portfolio Manager at Fintual, “In the third quarter we will see a further increase in this economic slowdown, which is mainly explained by the effect of more restrictive monetary policy imposed by the central bank.”

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Although growth forecasts for this year remain mostly between 1% and 2%, there are different opinions on whether it will be closer to 1% or 2%. Marco Correa, chief economist at Bice Inversiones, notes that “this year we expect 1.7% growth and for the next year an empty divergence. So, for now, growth this year will be close to 2%.”

In contrast, Ojaz says, “We expect this year GDP growth in the range of 1.5%-2.5%, centered at 2%.”

Pablo Cruz, chief economist at BTG Pactual, confirms, “It will depend on when consumption becomes more normal. If that happens in the second half of the year, we are more likely to grow by close to 2%. If we see a more pronounced decline in the second quarter We should be closer to 1%.

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