Chile cenbank boosts GDP forecast for 2023 but lowers 2024 estimate

SANTIAGO (Reuters) – Chile’s central bank on Wednesday improved its expectations for the country’s economic growth this year but lowered estimates for 2024 as high inflation keeps hindering “sustainable” growth.

The authority said in a report it expects 2023 gross domestic product (GDP) to come in between -0.5% and +0.5%, up from a previous forecast of a drop of between 0.5% and 1.75%.

In 2024, GDP would grow 1% to 2%, it said, lowering its previous forecast of 2% to 3%. The report also noted that average annual inflation would reach 7.9% in 2023 and close the year at 4.6%.

“The inflationary problem is still present,” the report stated. “The process of inflation convergence hasn’t consolidated. Inflation is still very high, with an underlying component that hasn’t showed decreases in the last months.”

The report noted that Chile’s economy is facing both internal and external difficulties, hampering economic projections.

“Chile’s economy is facing a complex time. Inflation has been high for a long period, excess spending hasn’t been fully corrected and the external scenario has become more uncertain,” the report stated, adding that reducing inflation is essential “for economic performance to improve sustainably.”

The bank expects inflation to keep declining in the coming quarters and converge at the 3% goal towards the end of 2024. The current account deficit is also expected to decline, reaching values in the order of 4% of GDP by the end of this year.

The report also noted that the price of copper – the country’s main export – would average $3.85 per pound this year, from the $3.55 forecast in December. On the other hand, investment is expected to be weak this year and next.

(Reporting by Fabian Andres Cambero and Gabriel Araujo; Editing by Andrea Ricci)