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Montevideo, November 15th 2018 - 17:17 UTC

Chilean economy contracts for the first time in seven years; minister blames “temporary factors”

Tuesday, December 6th 2016 - 09:09 UTC
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Finance minister Rodrigo Valdes said that the 0.40% drop in economic activity in Chile in October was due to temporary factors Finance minister Rodrigo Valdes said that the 0.40% drop in economic activity in Chile in October was due to temporary factors

Chile's economy contracted for the first time in seven years in annual terms, as manufacturing and mining activity fell, potentially paving the way for the central bank to cut interest rates to spur growth. Economic activity fell 0.4% in October from the year-earlier month, the first annual contraction since October 2009, central bank data showed on Monday.

 However Finance minister Rodrigo Valdes said that the 0.40% drop in economic activity in Chile in October was due to temporary factors.

The decrease in the October Monthly Economic Activity Index (Imacec), which had not declined since July 2009, must be weighed carefully because it was caused by a plunge in mining activity and two fewer work days, compared to the same month in 2015, Valdes said.

“It's a lower figure than might have been expected, but we have to look at it cautiously and not overreact,” the finance minister said, adding that the November number could be more positive.

The Imacec, which is prepared by the Central Bank, incorporates 91% of the goods and services included in the gross domestic product (GDP).

Three of the four sectors included in the index rose in October, and the economic indicator would have risen 1% during the month on a year-on-year basis if mining was excluded, Valdes said.

“We have a healthy country that can grow more, we're dealing with some complications, like everyone else, but Chile can do more,” Valdes said.

Chile's economy is facing headwinds from the slowdown in the copper mining industry and a challenging regional economic scenario, the finance minister said.

The Central Bank expects Chile's GDP to grow between 1.25% and 2% in 2016.

“We've had an adjustment in the copper industry, both in production and investment, which has been much longer and deeper than anyone would have expected. I expect this is reaching the end,” Valdes said.

Latin America is in recession due to the economic contractions in Brazil and Argentina, the finance minister said. Chile has “orderly macroeconomic policies” in place to deal with the situation, Valdes said.

Categories: Economy, Politics, Chile.

Top Comments

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  • Marti Llazo

    Chile's principal economic problem right now is not so much its social programmes as the lack of markets for its mix of exports. As goes copper, so goes Chile. And copper is down. Bachelet's incompetence, corruption, and associated attempted political correctness are pretty much fixed features in Chile that don't have large impacts on the economy.

    Dec 06th, 2016 - 04:07 pm +1
  • Bisley

    There is no difficulty in understanding why Chile's economy is declining, and will continue to decline if the cause of it remains -- socialism. One need only to look at Cuba and Venezuela, both of which were more prosperous before the socialists took control and destroyed their countries.

    Dec 06th, 2016 - 02:51 pm 0
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