|
The Chilean economy continues to develop
along the lines expected by the market. While the buoyant expansion of the
1990s, which had earned Chile the nickname of “Latin Tiger”, seems to have
given way to a more moderate growth trend, the Chilean economy is well
poised for faster economic growth. As the region’s most open economy, Chile
stands to profit most from the anticipated rebound of the global economy.
|
|
Economy
exceeds expectations in July
In July, the economy expanded 3.5% compared to the same month last year,
according to the monthly indicator for economic activity (IMACEC,
Indicator Mensual de Actividad Económica). The reading came in well ahead
of the 2.9% growth rate that Consensus Forecast panellists had expected
last month. Following on economic growth of 2.4% in May and 3.0% in June,
economic activity once again accelerated. Seasonally adjusted data confirm
the acceleration, with the economy expanding 0.31% over the preceding
month compared to 0.25% monthly growth observed in June.
Industry
recovers from weak July reading
More recent economic indicators for August paint an ambiguous picture of
the current economic developments. Industrial production rebounded from a
2.9% contraction registered in July to a 2.1% expansion in August, as both
consumer and capital goods production improved markedly. However, the
industrial production index usually exhibits very erratic movements and
the quarterly average, which smoothes out the volatility in monthly
shifts, continues to point downwards. In fact, the quarterly average in
August exhibited barely positive growth (+0.4% year-on-year) after having
peaked at 5.8% growth in February.
Employment develops favourably
Unemployment reached 9.4% in the moving June-August quarter. While the
figure was 0.3 percentage points higher than the number for the moving
quarter up to July, the increase was mostly due to seasonal factors. When
compared with the same month last year, unemployment actually dropped 0.2
percentage points. However, the improvement over the same period last year
is beginning to melt away. In June, the unemployment rate improved 0.4
percentage points over the same month last year, dropping to 0.3
percentage points in July. These diminishing rates in the reduction in
unemployment are mostly due to population dynamics. As a result, an
increasing number of people are joining Chile’s labour force. Without this
effect, unemployment would have dropped more notably, as the number of the
employed is growing at a rapid pace (+3.1% year-on-year).
Promising outlook if global recovery materialises
The recent data suggest that the bout of weakness observed in the second
quarter may give way to more positive developments in the third quarter.
For August, Consensus Forecast panellists expect the economy to advance at
an annual 2.7% pace. For the third quarter, the Consensus sees economic
growth at 3.3%, well ahead of the 2.7% expansion observed in the second
quarter. A more favourable global scenario, which most analysts are
expecting in the shorter term, would support the domestic economic
recovery. As the region’s most open economy, Chile stands to profit most,
if the long awaited global rebound indeed materialises. The Consensus sees
the economic growth accelerating further, with the expansion reaching 3.9%
in the final quarter of the year. The forecast for the full year 2003
stands at 3.2% and for 2004 panellists forecast 4.3% growth, unchanged
from last month. With its forecast for 2003, the Consensus is at the
centre of the current Central Bank forecast range. On 10 September, the
Central Bank presented its Monetary Policy Report (published three times a
year in January, May and September) to Congress. According to the report,
the Bank expects the economy to grow between 3.0% and 3.5% this year,
which is down from the 3.0% to 4.0% forecast published in May. For 2004,
monetary authorities expect the economy to grow between 4.0% and 5.0%,
which is both in line with the Consensus and the government’s 4.4%
estimate underlying the 2004 budget, presented to Congress.
|
