He Central Bank (BC) of Chile projected on Wednesday that gross domestic product (GDP) growth will be between 2% and 3% this year, a slight improvement from the December forecast.
According to the BC, the Chilean economy will grow again and with greater strength after the fiscal adjustment applied by the government of the leftist Gabriel Boric to contain the advance of inflation, which reached 12.8% in 2022, the highest in three decades.
“The local economy has closed the significant macroeconomic imbalances of previous years, inflation has had a rapid decline and is at levels closer to 3%, at the same time that inflation expectations are aligned with the goal” of 3% annually, indicated the financial authority in its Monetary Policy Report (IPoM).
In December, the BC expected growth for 2024 of 1.25%-2.25%. Inflation in 2023 was 3.9%.
The Chilean economy suffered the effects of the coronavirus pandemic and the consequences of the massive withdrawals of money from pension funds and social aid granted within the framework of this health crisis, which propelled prices upward.
The BC expects inflation in 2024 to end at 3.8%.
The figure is higher than the previous projection (2.9%-3.2%), in light of the indicators of the first two months of the year, when prices rose 0.7% in January and 0.6% in February.
“Data from the beginning of the year show some increase in annual inflation, in a context where activity has been somewhat better than expected, and consumption and investment ended 2023 somewhat weaker than previously estimated“, stated the issuing entity.
By 2025, inflation would be 3.4%, and 3% in 2026.
The Central Bank highlighted that “the convergence of inflation to the target (…) considers that the economy will not present relevant imbalances and that the RER (real exchange rate) will have a gradual decrease”.
The BC estimates that activity in 2025 and 2026 will grow less than in the current year, 1.5% and 2.5%, respectively.
The Report was released after the BC Council decided on Tuesday to lower the reference interest rate to 6.25%.
Source: Gestion
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