Chile’s construction industry outlook clouds as economic activity plummets in April

Following today’s announcement by the Bank of Chile that the Monthly Economic Activity Index (IMACEC) fell by 14.1% in April, compared with the same month a year earlier;

Dariana Tani, Economist at GlobalData, a leading data and analytics company, offers her view on the situation:

“April’s IMACEC data shows that the economic impact of the COVID-19 pandemic will be much worse during the second quarter of 2020, especially for sectors such as construction and mining, which until April had been less affected than other industries such as education, transport, restaurants and hotels.

“While the Chilean Government has already lifted quarantine restrictions in several areas across the country, the surging numbers of COVID-19 cases and deaths in May, especially in Santiago, the country’s capital, has led public officials to impose new lockdown restrictions in Santiago, Iquique and Alto Hospicio until June 5 to ease the pressure on the country’s healthcare system.

“This has forced many construction projects, especially in the housing market, to be temporarily halted, putting many billions of dollars of investments and construction jobs at risk.

“According to the Chilean Chamber of Construction (CChC), there are currently 778 housing projects paralyzed across the country (747 in the Santiago Metropolitan region and 31 in other regions) due to the new lockdown measures announced by the government in mid-May. The CChC said that the affected projects make up for a total of 103,145 homes and employs over 338,000 people.

“Reflecting on these developments, GlobalData expects Chile’s construction industry to contract by -4.5% this year, down from the previous projection of -3.0% in April’s update.

“With the arrival of the southern hemisphere winter, Chile is bracing for a peak in COVID-19 cases. The country has the third highest coronavirus cases in Latin America, after Brazil and Peru even though it has a population of around 19 million, the seventh largest in the region. As of June 1, Chile had 99,688 confirmed cases of COVID-19 and 1,054 fatalities. Furthermore, 80% of the country’s cases are concentrated in the Santiago Metropolitan region. Coronavirus cases are surging in Latin America, which along with the US, is now an epicenter of the pandemic.”

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