What: Chile’s economy beat expectations in the second quarter as billions of dollars in fiscal stimulus triggered a retail sales frenzy during the pandemic.

Why it is important: Chile has spent more to offset the economic impact of the pandemic than any other key emerging-market country, while a series of early pension withdrawals has put almost USD 50 billion in people’s pockets.

That cash has fueled a consumption boom, with retail sales posting eye-popping year-on-year gains of 66% in June and 72% in May. The economy expanded 18.1% from a year prior, the central bank reported.

The stimulus also helped to offset the economic blow of strict lockdowns and longer nightly curfews implemented by the government to battle a record surge in virus cases during the second quarter. Going forward, growth is expected to speed up as the vaccination campaign drives down infections while the economy slowly reopens.

The South American country will see GDP expand by as much as 9.5% this year, according to the central bank. On top of that, lawmakers are debating new pension drawdowns which may add even more impetus to economic growth.

Chile Growth Outpaces Forecasts, Buoyed by Stimulus Spending