Chile's economy grew 0.8% in the third quarter compared with the same period in 2013, the worst performance in five years, the Central Bank reported Tuesday. The bank also announced that the basic rate will remain unchanged at 3%.
Between January and September, Chile's GDP increased 1.8%. In the first quarter of the year on an inter-annual basis GDP grew 2.7%, but expansion slowed to 1.9% in the April-June period.
Third-quarter results reflect a 1.1% increase in personal services, countered by a 2.7% drop in manufacturing and 6.6% decrease in agriculture, the report said.
While most sectors of the Chilean economy had a weak performance between July and September, fishing increased 10.7% and utilities expanded 8.4%, the Central Bank said. Exports increased 1% in the third quarter over the same period in 2013, while imports fell 7.2%.
Regarding the basic interest rate of 3%, the bank said that activity performance, domestic demand and employment continue with low dynamism.
Local financing conditions reflect the impact of the monetary stimuli. Inflation in October surprised significantly on the rise, 5.7% annually. In the most probable scenario inflation will remain for several months above the target's tolerance higher limit. Inflationary surprise can be mostly associated to specific and transitory factors. The evolution of prices will continue to be closely monitored. Inflation expectations in the midterm remain in the range of 3%, said the bank's monetary committee.
Further on, overseas recent data reaffirm good economic performance prospects in the US and lower growth and lower inflation in the Euro zone and Japan, a phenomenon which has increased the monetary policy differences between the above mentioned countries.
External financial conditions tend to normalize during the month, but new outbreaks of volatility can't be discarded. Growth projections for emerging Asia are gradually diminishing, while in Latin America there is a confirmation of weakness in a significant part of the region. Oil price again dropped, while copper has remained relatively stable.
Finally the bank reaffirmed its commitment to conduct monetary policy with flexibility, so that projected inflation situates at 3% in the policy horizon. This way the Chilean central bank during a four month period has consequently cut the basic rate 25 points per month from 4% in June to 3% in October.