Chile central bank forecasts economy to shrink more than expected in 2020

Chile's central bank forecast on Wednesday that the economy of the world's top copper producer would contract by 5.75% to 6.25% in 2020, more than previously predicted as the coronavirus crisis hit output. However, the central bank said in its Ipom quarterly economic report that gross domestic product would rebound between 5.5% and 6.5% in 2021, a stronger recovery than it had initially expected.

Chile's central bank forecast on Wednesday that the economy of the world's top copper producer would contract by 5.75% to 6.25% in 2020, more than previously predicted as the coronavirus crisis hit output.

However, the central bank said in its Ipom quarterly economic report that gross domestic product would rebound between 5.5% and 6.5% in 2021, a stronger recovery than it had initially expected. The more favorable scenario next year will be bolstered by a higher copper price of $3.20 per pound in 2021, the bank predicted. The metal accounts for around half of the South American nation's exports and is vital to economic output.

The bank's policymakers were nonetheless cautious in their optimism for the coming months, warning that recently announced health restrictions in the capital Santiago could slow the economy's recovery. Chile's health authorities on Monday announced new measures, including a limited quarantine just weeks before the holidays, following a spike in new cases of COVID-19.

The bank said it saw inflation for 2020 at 2.8%, up from a previous estimate of 2.4%. Consumer prices are expected to rise 2.6% over 2021, the report said.