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Chile: Country Economic Forecast: 13 Jan 2012

10 Pages Oxford Economics January 13, 2012 SKU: OFE6769133

The November IMACEC reading revealed a 0.8% increase in activity from the previous month. But this followed a weak result in October and the index was just 3.9% higher than a year earlier. Moreover, external trade data for December suggest that activity may have slowed further. The Chilean peso (CLP) ended the year at CLP521 to the US$, 11% below the 2011 peak seen in July. This was the result of falling copper prices and sliding foreign capital inflows in the second half of the year, caused by a deteriorating global outlook. Domestic demand remained robust through 2011, underpinned by healthy labour market conditions and solid investment growth. But the deterioration in the global outlook will feed through into more subdued domestic activity, and unemployment is expected to rise moderately. We expect GDP to expand by 3.6% in 2012 as a whole, after growing by an estimated 6.1% in 2011. Inflation rose to 4.4% in December, its fastest since 2009 and higher than expected. However, the rise is forecast to be temporary and not sufficient to prevent the central bank from starting to lower interest rates in February as a means of insuring against the highly uncertain 2012 outlook. A disorderly default in Europe remains a significant risk for Chile, as it would result in a sharp decline in global demand and copper prices, weakening the trade and fiscal balances.

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Chile: Country Economic Forecast: 13 Jan 2012

Oxford Economics
January 13, 2012

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