Chile’s government has revised its GDP growth projection for this year to 0%, down from the previous estimate of 0.2%. This adjustment comes after a significant economic indicator suggested a growing risk of a recession.
However, the government maintains its forecast of 2.5% growth for the following year. Additionally, public debt is expected to increase from 38.1% of GDP in 2023 to 41.2% in 2024, according to the Public Finances Report released on Tuesday.
Chile has faced challenges in 2023 due to factors like high interest rates, decreased confidence, and increased uncertainty in key trading partners such as China.
The country received unexpected news when the central bank released the August Imacec, which is a proxy for GDP and indicated a decline in economic activity. Finance Minister Mario Marcel has expressed optimism, stating that the economy is gradually recovering after enduring various shocks.
In recent meetings, policymakers have reduced interest rates by a total of 175 basis points, bringing them down to 9.5%. This move comes as inflation is gradually approaching the target range.
The central bank had previously adjusted its GDP forecast for 2023, now estimating it to be between -0.5% and 0%, as opposed to the previous range of -0.50% and 0.25%. Looking ahead to next year, the economy is expected to grow between 1.25% and 2.25%.
According to analysts surveyed by Bloomberg, Chile’s economy is expected to shrink by 0.2% this year, marking the weakest performance in South America, with only Argentina facing a more challenging economic situation.
