Chile´s export-driven economy, once the envy of Latin America, will see a painfully slow recovery after being battered by the one-two punch of mass protests in late 2019 and the slow-moving coronavirus crisis, market watchers said.
The Andean nation, among the region´s most dependent on mining and agricultural exports, saw the value of its shipments abroad plummet by nearly 9% in the first quarter alone, according to Customs´s data released in early April.
The sharp drop in exports and rising unemployment follow months of protests over economic and social inequality that left behind billions in losses to businesses and destroyed public infrastructure across the country.
While Chile´s all-important mining sector has escaped the worst of both the protests and the coronavirus thus far, the value of top exports fruit, vegetables, salmon and forest products plunged in the first quarter, Customs data shows. Services and tourism have also tumbled.
“Normalization, especially in the trade and services sector, will be very gradual,” said University of Santiago economist Hernán Frigolett. “People are afraid and the health crisis will likely continue until September.”
The country has confirmed more than 8,000 cases of coronavirus since the outbreak hit six weeks ago, among the highest tallies in Latin America.
Chile closed its borders early in March, and large swaths of the capital Santiago, a city of 6 million people, have been locked down to halt the spread of the virus. Malls, schools, movie theaters and most non-essential services have been shuttered.
Chile’s central bank, which already had an outlook for tepid growth of 0.5% to 1.5% in 2020, slashed its forecast. It is now calling for the economy to contract from 1.5% to 2.5% in 2020.
Though central bank policymakers predict a slow recovery by the third quarter, economic analysts in a recent bank poll predicted a contraction of 4.9% in the second quarter, making a rebound as early as the third quarter less likely.
Some analysts said that worsening economic conditions could fan the flames of the protest movement after the outbreak recedes.
“The pace of recovery will depend … on the resurgence of events such as those observed in late 2019,” brokerage BanChile said in a note.