Finance Minister Ignacio Briones slashed the official forecast for economic growth this year to 1.4% from 2% just a month ago, and he put next year’s expansion at 1% to 1.5% instead of its 2.3% estimate previously.
“These aren’t just numbers. This means thousands of companies and jobs today are at risk,” Briones told a news conference. “The violence, the looting and the destruction have halted the economy with enormous costs for Chileans.”
Riots in Chile began on Oct. 18 over a hike in metro fares but quickly spiraled into mass protests, arson and looting that have left 26 dead and upwards of $1.5 billion in losses for businesses. The peso has plummeted to a historic low, prompting multiple central bank interventions.
Briones said the government will invest $2.4 billion in infrastructure as part of its recovery plan, which also aims to stave off job losses and help small businesses.
Government spending will rise 9.8% next year and the fiscal deficit will widen to 4.4% of gross domestic product. The government plans to sell some $3.5 billion in foreign currency bonds next year to help meet financing needs, more than in previous years, Briones said.
Earlier on Monday, the central bank said the economy shrank 3.4% in October from the same month a year ago, marking the worst contraction in a decade. The IMACEC economic activity index, proxy for gross domestic product tallied on a monthly basis, fell 5.4% from September.
Scotiabank labeled it the “beginning of the bad news” in a note to investors.
Non-mining activity fell 4%, the bank said, marked by a sharp drop in education, transportation, business services and the hotel and restaurant sector.
Much of Santiago, Chile’s capital, was shut near the end of October as riots and looting closed streets, squares and many small businesses. Violence spiked again last week, prompting President Sebastian Pinera to renew calls for deeper reforms and a crackdown on lawlessness.
Mining activity in the world’s top copper producer nonetheless grew 2.0% year-on-year, as new production from Codelco’s Chuquicamata mine ramped up. Chile’s copper mines have mostly maintained production and kept operations running normally in the face of the unrest.
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