By Aislinn Laing
SANTIAGO, Sept 16 (Reuters) – Chilean business sectors adapting to a “new reality” in the coronavirus pandemic has contributed to a gradual stabilization in the economy as contagion rates diminish and lockdowns are slowly eased, the country’s central bank said on Wednesday.
The bank highlighted the “greater flexibility” of business, coupled with “the implementation of various initiatives to support companies and individuals and, also, the deployment of fiscal and monetary stimulus,” according to minutes of the bank’s latest policymaking meeting.
The Chilean government has announced at least $29 billion, close to 12% of GDP, worth of measures to combat Covid-19 and reactivate the economy, including one-off cash handouts, loans and mortgage deferrals for hard-hit citizens. A law allowing eligible individuals to withdraw 10% of their pensions early also brought an injection of liquidity.
However, the central bank board agreed unanimously that there was “no other option” than to maintain an expansive monetary policy, and keep the benchmark interest rate at the technical minimum of 0.5%, the same rate as since March.
The minutes echoed statements by the bank earlier in the month as it outlined a softening of its prediction for an economic contraction in 2020 due to the impact of the coronavirus to between -4.5% and -5.5% from the 5.5% and 7.5% contraction it foresaw in June.
The bank said in its latest minutes, however, that tough times were far from over, signaling challenges in job creation in the battered economy, and companies, households and the treasury rebuilding credit profiles on the back of a sustainable public debt burden.
“All of this highlights how the impact of the multiple shocks dealt to the Chilean economy are going to be quite durable,” it said. (Reporting by Aislinn Laing Editing by Nick Zieminski)