The emblem of the Central Bank of Chile is seen at its headquarters in Santiago, Chile, March 29, 2018. REUTERS/Ivan Alvarado/File Photo acquire license rights
SANTIAGO, Sept 6 (Reuters) – Chile’s central bank on Wednesday lowered the high end of its estimate for the country’s 2023 economic output, saying it now forecasts no gross domestic product (GDP) growth in the most optimistic scenario.
The Monetary Authority previously expected economic growth of up to 0.25% this year. The country kept the low end of its GDP forecast down by 0.5%.
The lowered estimate explains the impact of operational issues that have impacted mining production in Chile, the world’s largest copper producer, in recent months, the central bank said.
The monetary authority added that non-mining activity is expected to grow through the year-end.
However, the South American country’s economy is likely to recover by next year, the central bank said, with GDP growth expected of between 1.25% and 2.25%.
Chile’s central bank has been struggling to contain inflation, cutting interest rates by 75 basis points to 9.5% on Tuesday as price pressures eased faster than expected.
The central bank expects further interest rate cuts, it said on Wednesday and ended the year with interest rates between 7.75% and 8%.
Annual inflation in Chile slowed to 6.5% in July and is expected to fall to 4.3% by year-end, the bank said.
It is expected to decline to the 3% target in the second half of 2024, she added, taking into account the slowdown in recent months, the peso’s depreciation and high international fuel prices.
However, “the external scenario is still characterized by a high level of uncertainty,” the monetary authority warned.
Investment, defined as gross fixed capital formation (BFI), remains low in Chile, particularly in the construction sector, the central bank said, forecasting a 1.2% contraction in BFI this year and 0.6% next year.
Gross capital formation is likely to grow again by 2025 as domestic financial conditions ease, the central bank said.
The bank also maintained its copper price estimates, which are expected to end the year at $3.85/lb, falling to $3.70/lb in 2024.
Reporting by Fabian Andres Cambero; writing by Gabriel Araujo and Kylie Madry; Edited by Emelia Sithole-Matarise
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