(Bloomberg) -- The outbreak of mass unrest in Chile will slash the government’s 2020 revenues by $3 billion, according to a top budget official, further weakening the nation’s fiscal position which was already strained by higher spending to appease protesters.
Tax revenue fell far short of expectations in the fourth quarter, Chile budget office director Matias Acevedo said in an interview on Wednesday with Tele13 Radio, as rioting and looting caused economic activity to slump.
“There’s been a concrete impact on public finances,” he said. “These effects are cumulative. In other words, we are going to start off with $3 billion less, and any growth will be on top of a smaller base.”
The violent demonstrations that broke out in October have left more than 20 people dead, caused shops and other businesses to close, and interrupted public transport.
President Sebastian Pinera’s administration initially responded by calling in troops and implementing a broad crackdown on demonstrations. He’s since reversed course by agreeing to a plebiscite on a new constitution and pledging billions of dollars to heed social demands.
The government will spend some $3 billion dollars to stimulate the economy this year and officials are also calculating the costs of a healthcare reform, Finance Minister Ignacio Briones said in an interview with Pauta Bloomberg Radio on Monday. The budget deficit will widen to 3.2% of GDP according to analysts surveyed by Bloomberg, which would be the widest since 2009.
With the government constrained in how much extra help it can provide the economy, in the future Chile needs to place greater emphasis on ways to stimulate private investment, said Acevedo, who has been in his role for just over a month.
“When it comes to spending, considering both the temporary and permanent measures, today we are at the limit of what we can do,” he said.
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