MercoPress. South Atlantic News Agency

Strong showing of Chilean economy anticipates 5.5% GDP expansion in 2010

Finance Minister Felipe Larraín confident Chile will meet its objective

The recent 7.1% spurt in Chile’s economic growth registered by the Imacec index (a monthly indicator for economic activity) has made analysts increasingly bullish about Chile’s long-term growth prospects.

The sharp increase of 7.1% increase caught many analysts by surprise. “The market expected an Imacec of around 6.5%, but personally, I expected 7% due to the low base comparison with respect to last year (-2.7%)” said Universidad Andrés Bello economist Sebastian Mathews.

Finance Minister Felipe Larraín is confident that Chile will meet its growth objective of 5% year-end economic growth, and that it is possible to exceed it. Most analysts now agree that the Central Bank should raise the yearly growth projection to be somewhere between 5.0 and 5.5%.

The numbers that are coming out of particular industries, such as retail sales (up by 18%) and car sales (up by over 50% in a twelve-month period), show that this optimistic economic climate is being translated into confidence in the general public. “Buyers are more willing to make purchases of durable goods,” said the Finance Minister.

The Imacec Index is expected to continue to rise, even more than expected considering the low comparison numbers with respect to last year.

Jorge Selaive, chief economist of BCI banking group, calculates that the Imacec for the month of August with respect to last year will be somewhere between 7.8 and 8.8%.

With these numbers he expects a 7.2% growth in the third quarter and 5.5% in the fourth quarter, which puts the second semester growth estimates at 6.3%, which combined with a first semester growth of 4.1% puts the yearly growth at 5.2%.

These optimistic numbers lead most economists call on the Central Bank to adjust its monetary policy for the rest of the year with a higher growth projection.

By Ricardo Pommer  - Santiago Times