Chile’s economic activity to rebound slightly in Q4 but negative sentiment to exert pressure on domestic demand

Chile’s economic current conditions deteriorated at the margin. As anticipated earlier, the growth trend estimate was lowered to about 3 percent from 3.5 percent and the economic momentum decelerated slightly more in the third quarter, noted Scotiabank in a research note.

“There are some statistical factors that allow continued expectations of annual growth of 1.7 percent 2016, with some recovery in activity in the last quarter (particularly in the last two months)”, said Scotiabank.

But, this is not a change of trend. On the contrary, persistently negative sentiment in consumers and in business compelled lowering growth projections for 2017 to 2 percent and would keep under pressure any rebound in domestic demand, according to Scotiabank. The slow rebound in Chile’s economic activity and demand would continue in 2018 and reach the growth rate of 2.5 percent.

However, the trend growth, which is estimated around 3 percent, might not be attained before 2019. But there is a balance of risks not clearly biased by now: negative factors from weak terms of trade and domestic uncertainties are pushing down; however, on the positive side, there are signs of Chinese economy stabilising, a shift to more growth-focused political consensus and more robust capital inflows in emerging markets.