New Country Reports research report from Business Monitor International is now available from Fast Market Research

Boston, MA -- (SBWire) -- 11/22/2013 --We continue to expect that 2013 will see a shift in the Chilean economy, and we forecast real GDP growth to fall from 5.6% in 2012 to just 4.3% in 2013 and average 4.0% from 2014-2017, below consensus estimates. This slowdown is attributable to decelerating economic activity in China, which over the next several years will result in weakening real demand for Chilean copper exports and reduced investment into the country's mining sector.

We expect that in the short term the Chilean peso (CLP) will continue trading within the CLP490.00-520.00/US$ range it has occupied since a larger sell-off in May-June. That said, our core view is that lower interest rates, current account imbalances, falling commodity prices and policy normalisation in the developed world will keep the peso under downside pressure in the medium term.

View Full Report Details and Table of Contents

The Banco Central de Chile (BCC) will initiate a monetary easing cycle this year, which will last through 2014, in order to stimulate the country's slowing economy as fixed investment and domestic demand weaken. Indeed, we forecast that the BCC will cut its benchmark rate by 50 basis points to 4.50% by end-2013 and 4.00% by year end-2014.

An increase in government expenditure as revenue inflows weaken will see Chile's nominal budget balance flip from a surplus in 2013 into a narrow deficit in 2014. That said, while we see scope for a moderate rise in Chile's total debt as a percentage of GDP as the government borrows money locally in order to fund higher public spending, we maintain our view that Chile's debt burden will remain moderate by regional standards.

Weaker external demand for Chilean mining exports will see the country's trade in goods surplus continue to narrow in 2014. That said, slimmer profit margins from lower commodities prices will also lead to less profit repatriation by foreign firms, leading to a smaller income account deficit. As such, we forecast that the current account will remain in deficit in the coming years, but begin to shrink moderately beginning in 2014.

Major Forecast Changes

We revised down our 2014 real GDP growth forecast for Chile to 4.2%, from 4.6% previously, as the country's H113 economic performance has reinforced our conviction that lower commodities prices and weakening external demand for industrial metals will weigh on Chile's economy over a multi-year time frame.

Key Risks To Outlook

The main risks to our 4.2% 2014 real GDP growth forecast lies to the downside, given that economic conditions in China could deteriorate more than our Asia Country Risk team currently expects, weighing on Chile's economy through the trade and investment channels.

About Fast Market Research
Fast Market Research is an online aggregator and distributor of market research and business information. Representing the world's top research publishers and analysts, we provide quick and easy access to the best competitive intelligence available. Our unbiased, expert staff will help you find the right research to fit your requirements and your budget. For more information about these or related research reports, please visit our website at http://www.fastmr.com or call us at 1.800.844.8156.

Browse all Country Reports research reports at Fast Market Research

You may also be interested in these related reports:

- Hungary Business Forecast Report Q1 2014
- Mexico Business Forecast Report Q1 2014
- Brazil Business Forecast Report Q1 2014
- Lithuania Business Forecast Report Q1 2014
- Kuwait Business Forecast Report Q1 2014
- Croatia Business Forecast Report Q1 2014
- United Arab Emirates Business Forecast Report Q1 2014
- Slovakia Business Forecast Report Q1 2014
- Canada Business Forecast Report Q1 2014
- Malaysia Business Forecast Report Q1 2014