Economic Activity

Since November last year Chile began to reflect a sharp downturn in its economy that has maintained until today. One of the first signs of contraction was the fall of IMACEC (Monthly Indicator of Economic Activity) by 1.1% annually in November. However, the deepening of the crisis led to February this year the index is accentuated contraction to 3.9%. For its part, industry is showing trans-Andean consecutive falls since October, which in February stood at double digits (-11.46% on-year). 70% of Chilean exports are based on the copper market, after experiencing record highs in mid-2008, fell 65% last December and later recovered somewhere in the lost-21.8% since then. In this context, foreign sales fell between April and December last year 46.9% but, unlike the price of copper, not recover in the first two months of year but lost by 9.4% in value. To recover from this economic debacle, Chile may rely on two separate instruments.

On the one hand, the price of copper and the other interest rates. As for the price of copper, Chile is facing tax prices in the international market. For 2009 is expected to recover metal value but does not return to 2007 levels due to a drag effect that will suffer during the first half of this year. However, it is expected to recover value for 2010. Thus it is evident the high vulnerability of the Chilean economy against the international context because their incomes depend mainly abroad. Moreover, since the beginning of the year the Bachelet government is implementing a monetary policy of reducing interest rates. The TPM (Monetary Policy Rate) ended the year at 8.25% in March and is already at 3.27%. According to the Central Bank of Chile, would reach only 1.5% in December 2009. From the official agency, but it is expected that 2009 be a year that ends in a 0.5% contraction in gross domestic product and inflation of 1.8%, by 2010 it is projected that economic growth will reach 3%.

Tags:
| January 27th, 2011 | Posted in General |

Comments are closed.