Chile registers a surprise fall in inflation that reaffirms the downward trend

A person walks past a store in a shopping center in Santiago, in 2022.Tamara Merino (Bloomberg)

Chile had this Tuesday a new positive news for its economy.

The Consumer Price Index (CPI) recorded a surprise fall of ―0.1% in February, when the market expected a rise of up to 0.4%.

It is the first time since November 2020, in the midst of the covid-19 pandemic, that a drop in the cost of living has been observed.

The Minister of Finance, the socialist Mario Marcel, has said that this figure "reaffirms" the downward trend in inflation, which has been falling consecutively in the last five months.

"These are data to encourage us to continue on the path we are on, stabilizing the economy, responsible management of public finances and reducing uncertainty," explained the minister from Parliament, where today the Chamber of Deputies will vote on a key part of tax reform,

With the drop in February, the first in 27 months, inflation has fallen by 11.9% in one year.

According to the National Institute of Statistics (INE), in charge of communicating these figures, the decreases in both transport and food and non-alcoholic beverages stand out, which last year registered an annual increase of 25%.

Meats (especially chicken) and fruits registered the most important drops.

However, the price of clothing and footwear increased.

Economic management is being one of the bastions of the current government that this Saturday celebrates its first year in power.

Unemployment is in less than two digits and the price of the dollar against the Chilean peso has been controlled.

Despite forecasts that even spoke of recession for 2023, the Chilean economy registered growth of 0.4% in January.

Marcel, who attributes this scenario to local factors, has assured in recent days that they are the anticipation of a solid recovery trend.

For some economists, such as Sebastián Edwards, "the recent upturn in the economy is the product of the triumph of rejection" in the constitutional plebiscite on September 4, where a proposal for a transformative Constitution that generated uncertainty was thrown out.

“It is the dividend of September 4”,

Minister Marcel, a technician with extensive experience in the transition governments, has had a management praised from different political sectors and has established himself as the strong man of the Cabinet.

According to the latest Criteria survey, he is the best valued by citizens among the 24 ministers.

In 2022, public spending fell by more than 23% and a surplus was achieved for the first time in a decade.

With this scenario, it is highly difficult for President Boric to touch his government's economic team in the adjustment that would take place in the coming days.

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