Economy

Chile - Economic forecast summary (June 2015)

 

After a sharp slowdown in 2014 the economy is projected to gradually recover in 2015 and 2016. The pick-up in activity will initially be driven by higher public spending, but will increasingly be supported by stronger external demand for industrial goods from the United States and Europe.


As the exchange rate has stabilised, inflation is moderating, although it remains above the central bank’s target band. Since inflation expectations remain well anchored, monetary policy can continue to support growth in the near term, before moving to a more neutral stance as growth strengthens. The underlying stance of fiscal policy is expected to be expansionary in 2015, but then to become neutral in 2016 as the government remains committed to achieve a zero structural balance by 2018.


The large decline in copper prices in the aftermath of the commodity super-cycle has affected the investment plans of mining companies, which have significantly reduced investment since 2012. This decline is perceived to be to a large extent permanent, and mining investment is therefore not expected to recover very strongly, even in the medium term. Therefore, advancing the Productivity Agenda, which is meant to broaden the base of the economy, is essential. Structural reforms to open market further to competition will be particularly important to boost investment outside the mining sectors, increasing and making growth more inclusive.

 

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