UPDATE 2-Chile economy seen contracting 2% in 2020; Pinera promises 'cautious' reopening

(Adds details from budget report, context)

SANTIAGO, April 17 (Reuters) – Chile’s economy is expected to contract by 2% in 2020, the government said on Friday, while stimulus measures to combat the coronavirus pandemic will deepen the nation’s fiscal deficit to 8%, the largest gap since at least 1990.

The dire predictions from the country´s budget office came the same day center-right President Sebastian Pinera promised a gradual reopening of Chile’s economy, which has been largely shuttered for more than six weeks amid the crisis.

Pinera, in a televised speech, said while his priority was the health of his fellow citizens, the economy was a close second. He promised a “gradual and cautious reopening” in the coming weeks.

“We are preoccupied with taking measures to protect jobs, family incomes and helping companies to overcome this crisis,” Pinera said.

Chile has already announced a “historic” stimulus package of $17 billion, worth more than 5% of gross domestic product. The measures, including beefed-up unemployment checks and government-backed credit lines for small business, are expected to increase the country´s total debt to 32.7% of GDP, up from 29.6% previously, the budget office said.

Even with the stimulus, domestic demand will fall by 3.3% in 2020, down from a previous estimate of 1.1% growth. Annual inflation was seen at 3.3%, the agency said in its quarterly public finances report.

The Health Ministry said earlier this week it would begin handing out “health passports” next week to people deemed to have recovered from the illness. Those people, once screened to determine if they have developed antibodies to make them immune to the virus, could immediately rejoin the workforce.

On Friday, Chile confirmed 9,252 cases of the novel coronavirus and 116 deaths.

The economy of the world´s top copper producer, heavily reliant on exports, has been hammered by fast-falling prices and flailing demand for the red metal as the global trade withers amid the pandemic.

The budget agency said it expects the price of copper to average $2.36 per pound in 2020, down from a previous forecast of $2.80. (Reporting by Dave Sherwood and Aislinn Laing; Editing by Sandra Maler and Leslie Adler)

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