Chile’s central bank has revised its forecast for the country’s economic performance in 2023, indicating that it now expects zero growth in the most optimistic scenario. Previously, the bank predicted an economic expansion of up to 0.25% for this year, but it has now lowered its estimate due to operational issues affecting mining production in Chile. Non-mining activity, however, is expected to show growth by the end of the year. The central bank anticipates a rebound in the country’s economy next year, with GDP growth projected between 1.25% and 2.25%.
In its efforts to contain inflation, Chile’s central bank reduced its benchmark interest rate by 75 basis points to 9.5% on Tuesday. The bank expects further cuts and aims to close the year with a benchmark interest rate between 7.75% and 8%. Annual inflation in Chile slowed to 6.5% in July and is predicted to decrease to 4.3% by the end of this year. The bank forecasts inflation to reach the target rate of 3% in the second half of 2024.
However, the external economic environment remains uncertain, according to the central bank. Investment, particularly in the construction sector, continues to be weak in Chile, with gross fixed capital formation (GFCF) predicted to contract by 1.2% this year and 0.6% next year. The central bank expects GFCF to resume growth by 2025 as domestic financial conditions improve.
The bank has also maintained its price estimates for copper, projecting it to close the year at $3.85/lb and decrease to $3.70/lb in 2024.