Chilean Economy Outpaces Forecast

Source: Bloomberg

Chile’s economy grew a faster-than- forecast 5.7 percent in September from a year earlier, damping speculation of a cut in interest rates as the European debt crisis has a limited impact on domestic demand.

Month-on-month, output expanded 0.9 percent on a seasonally adjusted basis, the central bank said in a statement on its website today. The economy grew 4.8 percent in the third quarter, according to calculations made by Bloomberg based on bank data. The median forecast of 14 economists surveyed by Bloomberg was for the economy to expand an annual 5.2 percent in September.

Growth in September reflects increases in the retail and fishing industries, the bank said, without giving details. Policy makers will be in no hurry to follow Brazil’s lead by cutting their key interest rate because internal demand continues to exceed estimates, economist Alejandro Puente said by phone from Santiago today.

“We haven’t yet observed an impact on domestic growth” from the global slowdown, said Banco Bilbao Vizcaya Argentaria SA’s Puente, who forecast a 4.6 percent gain in September. “We expect the central bank to keep the rate unchanged at the next meeting and probably for the rest of the year.”

The peso weakened 0.5 percent to 499.16 per U.S. dollar at 11:22 a.m. Santiago time from 496.59 per dollar on Nov. 4.

Rate Outlook

Economists estimate the central bank will keep the benchmark interest rate unchanged at 5.25 percent during its Nov. 15 meeting before cutting to 5 percent in December, according to an Oct. 11 survey by the central bank. Those economists forecast the economy would expand 4.8 percent in September.

Gross domestic product in the world’s leading copper producer will increase 6.5 percent this year, which would be the fastest expansion since 1997, according to Finance Ministry estimates.

Santiago-based bank Banco de Credito e Inversiones estimates gross domestic product will climb 6.2 percent to 6.5 percent in 2011 from last year, chief economist Jorge Selaive said in a report e-mailed to investors today.

“We continue to expect the policy rate to remain on hold,” he wrote. “If it weren’t for the outbreak of external volatility and a relatively generalized correction of world growth expectations for 2012, discussions about policy options could include injecting something more of an anti-inflationary dose.”

Inflation Picks Up

Chile saw inflation quicken to a monthly 0.5 percent in September, its fastest pace since March, the National Statistics Institute said Oct. 7. The institute publishes October inflation data tomorrow.

Growth will slow to between 4 percent and 5 percent next year as a global deceleration reduces demand for Chilean exports, President Sebastian Pinera said in a speech in Santiago last week.

Copper prices have declined on concern the European debt crisis will reduce global demand for the metal, falling 25 percent to $3.152 a pound at the end of September.

Chile had a trade surplus of $837 million in October on $5.6 billion in imports and $6.4 billion in exports, including $3.5 billion in copper, the central bank said today.

The median estimate of seven economists surveyed by Bloomberg was for a trade surplus of $800 million.