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Chile Country Risk Report Q2 2018

Chile Country Risk Report Q2 2018

Executive Summary

Core Views

Real GDP growth in Chile bottomed in the first half of 2017, and will trend higher in the quarters ahead on strong private consump- tion, rising copper output and a steady inflow of investment. The non-copper sectors of the economy will likely become increasingly important drivers of growth in the years ahead.


Executive Summary
Core Views
Key Risks
Chapter 1: Economic Outlook
SWOT Analysis
BMI Economic Risk Index
Economic Growth Outlook
Growth Rebound To Continue Into 2018
Economic activity in Chile will continue to accelerate in 2018 on the back of increased output in the mining sector as well as rising
business and consumer confidence. In the years thereafter, modest copper price increases and political concerns will cap the pace
of growth.
GDP By Expenditure Outlook
TABLE: GDP GROWTH FORECASTS
TABLE: PRIVATE CONSUMPTION FORECASTS
TABLE: GOVERNMENT CONSUMPTION FORECASTS
TABLE: GROSS FIXED CAPITAL FORMATION FORECASTS
TABLE: NET EXPORTS FORECAST
External Trade And Investment Outlook
Deficit To Narrow, Stability Not In Question
Chile's external accounts will remain stable in the years ahead. Although current account deficits will persist, capital inflows will amply
cover financing needs.
Outlook On External Position
TABLE: CAPITAL & FINANCIAL ACCOUNT BALANCE
TABLE: CURRENT ACCOUNT BALANCE FORECASTS
TABLE: TOP 5 GOODS IMPORTS IN 2015
TABLE: TOP 5 GOODS EXPORTS IN 2015
Monetary Policy
Rates Have Bottomed, Will Trend Higher In 2018
Interest rates in Chile likely bottomed at 2.50% in 2017 and will hold through end-2017 given an upward tick in in flation. Policymakers
will begin a hiking cycle in 2018 as inflation and economic activity gain steam.
Monetary Policy Framework
TABLE: MONETARY POLICY FORECASTS
Fiscal Policy And Public Debt Outlook
Demands For Spending To Push Deficit Wider In Long Run
Chile's fiscal deficit will modestly narrow in 2018 as rebounding economic activity supports revenue growth. However, in the years
thereafter social demands for higher government spending will widen the deficit, increasing the country's debt burden.
Structural Fiscal Position
TABLE: MAIN REVENUE AND EXPENDITURE CATEGORIES
TABLE: FISCAL AND PUBLIC DEBT FORECASTS
Currency Forecast
CLP: Appreciation, But Limited Upside
The Chilean peso is likely to appreciate modestly over the coming months as copper prices and real interest rates offer upside potential.
In the longer term, the peso will strengthen more significantly on the back of rising copper prices, accelerating economic growth and
modest inflation.
TABLE: CURRENCY FORECAST
Chapter 2: 10-Year Forecast
The Chilean Economy To 2027
Strong Fundamentals And Gradual Diversification Support Robust Growth
Chile will remain among Latin America's most advanced economies over the coming decade, supported by its strong fundamentals.
Manufacturing and services will increasingly drive growth, as the end of the commodity boom dims the copper sector's outlook.
TABLE: LONG-TERM MACROECONOMIC FORECASTS
Chapter 3: Political Outlook
SWOT Analysis
BMI Political Risk Index
Domestic Politics
Piñera Victorious, But Faces Challenging Road Ahead
Sebastian Piñera's return to the Chilean presidency is broadly positive for economic growth, given his pro-investment policy
preferences. That said, he will likely face a highly divided policymaking environment that will limit his ability to enact policy
changes.
Long-Term Political Outlook
Chile's Stability Unlikely To Be Challenged In The Next Decade
Chile will remain the most politically stable country in Latin America over the next decade, supported by strong institutions and
orthodox policy. That said, the country will grapple with concerns about economic inequality, slowing economic growth and ethnic
tensions.
Chapter 4: Operational Risk
Operational Risk
TABLE: OPERATIONAL RISK
Conflict Risk
TABLE: MAIN ACTIVE TERRORIST GROUPS
TABLE: POLITICAL VIOLENCE RISK
TABLE: MAJOR CONFLICT FLASHPOINTS
TABLE: BUSINESS RESPONSE TO CONFLICT RISK
Transport Network
TABLE: ROAD RISKS
TABLE: RAIL RISKS
TABLE: PORTS AND INLAND WATERWAY RISKS
TABLE: AIR TRANSPORT RISKS
Chapter 5: BMI Global Macro Outlook
EM Growth To Accelerate In 2018 While DMs Plateau
TABLE: GLOBAL MACROECONOMIC FORECASTS
TABLE: DEVELOPED STATES – REAL GDP GROWTH, % y-o-y
TABLE: EMERGING MARKETS – REAL GDP GROWTH, % y-o-y
TABLE: CHILE – MACROECONOMIC DATA & FORECASTS

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