Chile’s economy posts sharpest contraction since late 2022 on mining decline

Chile’s economy recorded its sharpest annual decline in more than three years in the first quarter, according to official data, hit by the key mining sector that faced lower copper grades and adverse weather.

On an annual basis, gross domestic product declined 0.5% in the period, central bank data showed on Monday, missing expectations of 0.1% growth, and slowing down from a 1.6% year-on-year increase in the last quarter of 2025.

Inflation jumped in March and April, posing a challenge for policymakers trying to balance sluggish growth with controlling inflation fueled by the war in Iran and its impact on commodity prices.

“The weak GDP reading may temper some of the more hawkish voices on the central bank, but we think policymakers will remain focused on inflation,” Capital Economics analyst Kimberley Sperrfechter said.

The economic downturn in the world’s-largest copper miner was the sharpest since late 2022, when the economy contracted by 2% year-on-year in the fourth quarter.

The annual contraction in the first three months of the year was led by a 5.4% decline in agriculture and forestry and a 3.1% drop in the key mining sector, Chile’s central bank said.

“The decline in mining activity reflected the performance of copper mining,” the bank said, while the rest of the mining sector grew, driven by lithium, gold, and silver mining.

Copper mining operations were affected by lower grades of the mineral, adverse weather conditions, and maintenance that reduced its production, the report added.

The Andean country’s economy contracted by 0.3% in the first quarter from the previous three-month period, slipping from a revised 0.5% expansion the previous quarter and just above the 0.2% contraction forecast in a Reuters poll.

Quarterly economic activity in the world’s largest copper miner was also mainly hampered by its key mining sector, which declined 1.3%.

(By Aida Pelaez-Fernandez and Natalia Ramos; Editing by Gabriel Araujo, Alexander Smith and Alistair Bell)