Chiles solid institutions its low level of public debt and the savings the

Chiles solid institutions its low level of public

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the natural disaster mounted to very significant levels, it has not threatened the macroeconomic stability of the country. Chile's solid institutions, its low level of public debt, and the savings the country accumulated during years of booming copper prices have contributed to the recovery. In recent years, the investment environment has been supported by the
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Created on 05 Sep 2013 Page 5 of 19 continued implementation of sound policies based on the inflation-targeting monetary policy program, a floating exchange rate, the structural fiscal surplus rule, and trade liberalization, as well as a robust financial system. Nevertheless, to increase productivity, it is necessary to make further enhancements in human capital accumulation and to bring more efficiency into the financial and labor markets. Still, a number of structural issues will continue to prevent long-term growth above 5%. Since 2004, Chile has faced disruptions in natural gas supply from its only source, neighboring Argentina. Although the effect of such events is moderated by the fact that three-fourths of firms that use natural gas have converted their plants to alternative energies, according to the Chilean central bank, gas shortages and higher energy prices yielded a loss of 1.0–2.6 percentage points in the growth rate of the manufacturing industry in recent years. Energy supply will remain a conditioning factor for economic growth. Another structural issue regarding long-term growth is the limited diversification of Chilean exports. Export earnings rely heavily on natural resources, essentially mining (copper), and then on forestry, industrialized products, fish, and fruits. To achieve higher sustainable growth rates, Chile should expand its exportable base. This will occur in time, as gains from trade liberalization materialize. At last, improvements in income distribution are required to support continued domestic demand growth. Growth GDP Our forecast for GDP growth shows domestic demand expanding at moderate rates, amid weakening external demand. The economy should converge to its potential growth in the longer term, estimated at 4.5–5.0%. Public and private reconstruction efforts continue to fully restore infrastructure and capacity damaged during the 2010 earthquake. Our forecast for GDP growth shows domestic demand expanding at moderate rates, amid weakening external The Chilean economy will remain on a moderate positive growth trend, anticipating a 4.3% expansion in the demand. short term. The slow recovery in global growth, amid lower copper prices, poses some risks over the continuation of Chile's strong trend in the medium term. Copper prices have fallen 10.5% since January. Our economic outlook suggests that commodity consumption growth will begin to improve in late 2013. Nevertheless, Chile's economic indicators continue to show the country would be capable of weathering such conditions in the medium term. We anticipate domestic demand will continue to drive growth under a still optimistic although cautious confidence environment, favorable conditions for access to credit, and a tightening labor market. Employment levels will be supportive of aggregate consumption. Gross fixed capital formation is projected to slow to 6.7% growth rate in the medium term. Investment growth will be higher in
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  • Summer '18
  • Sagar Arora
  • Exchange Rate, Inflation, ihs global insight, international data sources, Microsoft Excel format

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