Chile’s Economic Growth Revised Upward

• Fitch Solutions forecast that the Chilean economy will grow by 2.7% in 2024 (previously 1.8%), after an estimated 0.2% expansion in 2023. Lower interest rates and inflation and a recovery in copper output will drive the expansion. Still, the pace of rate cuts by the Banco Central de Chile (Central Bank of Chile- BCCh) and import demand from Mainland China are key risks.
• The updated forecast aligns with the government’s projection of 2.7% and slightly above the Bloomberg consensus of 2.3%. Data for Q1 2024 came in well above expectations, with the economy expanding by 1.9% quarter-over-quarter (QoQ) on the back of strength in the mining and commercial sectors.
• That said, risks are skewed mostly to the downside. If the pace of the BCCh’s cutting cycle is more conservative than pencilled in, higher rates will continue to pose a headwind to economic activity in 2024.
• However, if copper prices surge further, and Chile overcomes the operational mining challenges seen all through 2023, there could be an increase in output and even stronger growth than currently predicted though this scenario is less likely.

(Source: Fitch Solutions)