In line with government expectations and thanks to a “strong rebound of confidence”, the Chilean economy is positioned to have the region’s highest growth in 2018, according to the International Monetary Fund.
A week after the publication of its world forecasts, the International Monetary Fund (IMF) has released a report, “Outlook for the Americas: A Tougher Recovery”, in which it indicates that economic activity in Latin America will continue to recover. For this year, it anticipates growth of 1.6% as compared to the 2% it had forecast in April. Despite the reduction, this still represents an acceleration from the region’s 1.3% expansion in 2017.
“While growth is accelerating in some countries, the recovery has become tougher for some of the largest economies, because market pressures at the global level have been amplified by country-specific vulnerabilities,” stated the IMF in its report.
For growth in Chile, the IMF raised its forecast to 3.8% this year and 3.4% next year. In its previous report in April, it had forecast 3.4% for this year and 3.3% in 2019. The increase reflects “the ongoing strong rebound of business and consumer confidence, which is expected to largely offset the drag from higher oil prices”. The report added that “inflation will continue to gradually converge towards the target of 3%, driven by the strong growth momentum and higher oil prices."
The new forecasts are in line with an update of the government’s forecasts in which it raised its projection of growth this year from 3.5% to 3.8%. Finance Minister Felipe Larraín remarked that “the increase in the forecast for the growth of the Chilean economy is certainly very welcome.”
The increase in the outlook for Chile follows a reduction in forecasts for the region. As a result, Chile would be its fastest-growing economy in 2018, followed by Peru, with forecast growth of 3.7%, and Colombia, with 2.7%. The economies in which growth will be slowest include Argentina, with just 0.4% this year, down from an earlier forecast of 2%, and Brazil, with 1.8%, down from the 2.3% forecast in April.
Other signals: investment
The improved outlook for the Chilean economy has also been reflected in a significant increase in the entry of foreign capital. According to the Central Bank, net foreign direct investment (FDI) reached US$8,475 million in the first four months of this year, up by 655% on the same period last year. For more details, see this article.