Chile GDP Shrinks as Copper Slump Weighs on Economy

Chile's economy contracted in the second quarter, official data showed on Tuesday, as a sharp decline in copper production dragged down the country's key mining sector.

Gross domestic product fell 0.2% in the April-June period compared with the same quarter last year, according to the central bank. The figure missed economists' expectations of 0.1% growth, though it marked a slight improvement from the revised 0.3% contraction recorded in the first quarter.

The mining sector, which is central to the world's largest copper producer, shrank 6.4% year-on-year. The central bank attributed the drop to lower ore grades and maintenance work that reduced output at major deposits.

The weak data, combined with recent easing inflation, is likely to reduce pressure on the central bank to tighten monetary policy, analysts said. The bank is expected to hold its benchmark interest rate at 4.5% at its September meeting and maintain that level for the next two years.

On a quarter-on-quarter basis, the economy was flat in the second quarter, missing forecasts of 0.3% growth, though it performed better than the previous three-month period, which contracted 0.3%.