New Chile lockdown will add to wider uncertainties

Significance

At the same time, a new Central Bank report suggests that, despite a sharp liquidity-driven economic rebound this year, the country faces a lean medium-term outlook.

Impacts

• Lack of compliance with lockdowns has left the government with few tools, other than vaccination, for controlling the pandemic.
• Preliminary estimates suggest that fiscal spending will rise by a massive 25% in 2021.
• Monetary policy will face the challenge of balancing inflation risks against the lagging recovery of employment.