MercoPress. South Atlantic News Agency

Chile's growth slows significantly in last 2008 quarter

Pte. of Chile M. Bachelet

Chile's economy grew 0.5% in December, the worst performance for that month in a decade, according to the latest figures released on Thursday by the country's Central Bank.

Analysts said the IMACEC economic activity index was below forecast and follows a lower-than-expected 0.1% rise in November, which means the economy expanded 3.4% in 2008, down from a 5.1% in 2007. Some analysts say that if Chile were to measure GDP in terms of changes against the prior month or prior quarter – as many developed economies like the United States do -- then it would technically be in recession. December's growth means the last quarter of 2008 expansion was 1%. Growth in the first quarter was 3.3% and 4.5% and 4.8% in the second and third quarters. The government said it will release the definitive growth figure for 2008 next March 23. "It is not a figure that can leave anyone happy, but nor is it a surprising figure," Finance Minister Andres Velasco said. Chile's peso weakened around 0.5% against the dollar in early trade on the weaker-than-expected data, but later recovered ground to end firmer. "In seasonally-adjusted terms, IMACEC fell 1.1% compared to the prior month but expanded 0.6% on an annualized basis," the central bank said in a statement. The government is forecasting the economy will expand between 2 and 3% in 2009, though analysts say this is overly optimistic and some see growth of no more than 1% percent and possibly even a slight contraction. Last week government data showed strong contractions in Chile's industrial output, mining activity and supermarket sales in December as the global crisis bit. Industrial activity fell by a greater-than-expected 3.7% in December from the same month a year ago, following a 5.7% fall in November. In January the central bank cut the target overnight lending rate, which was at its highest level in a decade, by a bigger than expected 100 basis points to 7.25%. Some analysts see a similar, or possibly bigger, cut this month.