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Chile Country Risk Report Q4 2018

Chile Country Risk Report Q4 2018

Real GDP growth in Chile will continue to gain steam in the quarters ahead, on rising copper output, increased business confidence and strong private consump-tion. The non-copper sectors of the economy will likely become increasingly important drivers of growth in the years ahead.

Chile's current account deficit will narrow in 2018 as the goods trade surplus widens. In the years ahead, a diversifying export base and strong copper production will support narrowing deficits, while capital inflows stabilise Chile's balance of payments position.

The Chilean peso will gradually depreciate over the next two years, due to relatively low real interest rates compared to Chile's emerging market peers and limited upside for copper prices. Over the next decade, a diversifying export base will help reduce the unit's close association with copper prices.

The Banco Central de Chile will enact one rate hike in 2018, increasing the benchmark policy rate by 25 basis points to 2.75% as inflation and economic activity pick up.

Chile's fiscal deficit will narrow in 2018 as an uptick in activity supports revenues, while a commitment to fiscal prudence limits spending growth. In the years thereafter, social demands on government spending will see the deficit gradually widen.

Key Risks

Should the Chinese economy deteriorate more significantly than currently anticipated in the coming quarters, copper prices could continue falling, leading to weaker-than-expected export performance, slower growth and depreciation of the CLP.

Similarly, the escalation of trade tensions between the US and China would likely reduce the price of copper, which is widely seen as an indicator of global trade, weighing on Chile's economy.

Relatively weak inflation could slow the pace of rate hikes in 2018, or potentially open the door to an additional cut if price growth does not pick up.


Executive Summary
Core Views
Key Risks
Country Risk Summary
Economic Risk Index
Political Risk Index
SWOT
Economic - SWOT Analysis
Political - SWOT Analysis
Economic Outlook
Economic Growth Outlook
Chile's Robust Growth To Continue Through 2018
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
Narrower Deficit, Strong Investment Inflows Support Chile's External Stability
Outlook On External Position
TABLE: CAPITAL AND FINANCIAL ACCOUNT BALANCE
TABLE: CURRENT ACCOUNT BALANCE FORECASTS
TABLE: TOP 5 GOODS IMPORTS IN 2017
TABLE: TOP 5 GOODS EXPORTS IN 2017
Monetary Policy
Soft Inflation In Chile Leads To Forecast Revision
Monetary Policy Framework
TABLE: MONETARY POLICY FORECASTS
Fiscal Policy And Public Debt Outlook
Chile's Fiscal Deficit To Widen Despite Promise Of Austerity
Chile Country Risk Q4 2018ContentsStructural Fiscal Position
TABLE: MAIN REVENUE AND EXPENDITURE CATEGORIES
TABLE: FISCAL AND PUBLIC DEBT FORECASTS
Currency Forecast
CLP: Little Upside For Peso Over H218
TABLE: CURRENCY FORECAST
10-Year Forecast
The Chilean Economy To 2027
Strong Fundamentals And Gradual Diversification Support Robust Growth
TABLE: LONG-TERM MACROECONOMIC FORECASTS
Political Outlook
Domestic Politics
Chile's Piñera Still Likely To Face Gridlock In Months Ahead
Long-Term Political Outlook
Chile's Stability Unlikely To Be Challenged In The Next Decade
Global Macro Outlook
Pressure On EM Grows, As Do Divergences
TABLE: GLOBAL MACROECONOMIC FORECASTS
TABLE: DEVELOPED STATES – REAL GDP GROWTH, % y-o-y
TABLE: EMERGING MARKETS – REAL GDP GROWTH, % y-o-y
Index Tables
TABLE: CHILE – MACROECONOMIC DATA AND FORECASTS

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