Chile's economy is growing faster than expected as President Gabriel Boric expects a strong 2024

(Bloomberg) — Chile's economic activity grew more than expected in November on gains in the mining and services sectors, something the president supports Gabriel Boricpredicts a recovery in growth in 2024 after a year of stagnation.

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The Imacec index, an indicator of gross domestic product, rose 0.3% since October, above analysts' average estimate in a Bloomberg survey of 0.2%. The index rose 1.2% from a year earlier, the central bank reported on Tuesday.

Chile is trying to put behind a year marked by tight monetary conditions, weak consumer demand and above-target inflation. The central bank expects growth to stall in 2023. Now the situation is starting to improve. Boric's government has said the economy will grow 2.5% in 2024, a pace that would be above the regional average that analysts had expected in a Bloomberg survey.

What Bloomberg Economics says

“We expect the moderate uptrend to continue in 2024 due to increasing production from new copper and gold mines, slower inflation and lower interest rates. Weak labor market conditions and uncertainty about economic and political reforms are burdens. Weak growth in China and lower copper prices are risks.”

— Felipe Hernandez, Latin American economist

— Click here for the full report

According to the central bank, mining grew 1.3% in November from the previous month, while services grew 0.3% in the period. On the other hand, trade fell by 0.6% due to declines in both wholesale and retail trade.

“It is virtually certain that we will end 2023 with a positive result,” said Finance Minister Mario Marcel after the publication of the November economic report on the economy. “We overcame the specter of recession last year. We’re starting 2024 on the right foot.”

Boric's speech

In a speech marking the New Year late Sunday, Boric said the economy would grow strongly in 2024, driven by job growth and investment.

“People expect solutions from politics, not pettiness or fighting,” he said, urging lawmakers to push forward his administration’s tax and pension reform proposals.

Read more: Boric says investment and jobs will drive Chile's economic comeback

The growth outlook is being boosted by the central bank's aggressive interest rate cuts, which have reduced borrowing costs by three percentage points since July. Annual inflation is slowing and will reach the 3% target this year.

On the other hand, business confidence remains historically low after a four-year attempt to rewrite the country's constitution failed and unsettled investors. Although unemployment fell in November, the number of jobs in the economy is still well below pre-pandemic levels.

A notable development in the November report was the third consecutive increase in non-mining activity, Credicorp Capital economists Daniel Velandia and Samuel Carrasco wrote in a note.

“For 2024, we maintain our above-consensus GDP growth forecast of 2.1%,” they wrote. “The investment outlook is likely to be less pessimistic than market estimates,” and slowing inflation will boost real wages.

– With support from Giovanna Serafim.

(Updates with Finance Minister quotes in sixth paragraph)

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