Chile unveils $5.5b stimulus plan as economy shrinks

Chile launched a massive $5.5 billion stimulus package after data showed its economy contracted 3.4 percent in October -- the largest year-on-year drop in a decade -- as widespread social unrest continues.

The package unveiled by Finance Minister Ignacio Briones on Monday includes boosting 2020 public spending by $3.03 billion, to support small, medium and large businesses.

Another $525 million are earmarked for other initiatives like the renovation of the metro system in Santiago, which has sustained serious damage since protests erupted on October 18. “Estimates show that this agenda will generate 100,000 new jobs next year,” Briones said.

But the measures will mean a real increase in public spending next year of 9.8 percent as compared to 2019, pushing the fiscal deficit up to 4.4 percent of gross domestic product. “Like any Chilean household that faces unforeseen trouble, we will turn to our savings and our borrowing capacity, while remaining aware that both have limits that cannot be exceeded,” Briones said.

The government announced the stimulus measures after the central bank reported the worrisome GDP figures for October. The 3.4 percent drop was far greater than the one percent decrease anticipated in official estimates, and represented the economy’s worst performance since 2009 at the height of the global economic crisis.

“Economic activity during the month was affected by the drop in services, commerce and manufacturing,” the central bank said.

Mining activity -- Chile accounts for nearly a third of the world’s copper production -- grew by two percent, but non-mining sectors contracted by four percent, the bank said.