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Chile’s economy grows more than expected on services and mining

Chile’s economy grows more than expected on services and mining

Chile’s economy grew more than analysts expected in July, led by services and mining, while still expanding at the slowest pace in four years.

The Imacec index, a proxy for gross domestic product, rose 0.9 percent from a year earlier, the central bank said. The median forecast of 14 economists surveyed by Bloomberg was for growth of 0.4 percent. Economic activity expanded 0.5 percent from the previous month.

Central bank President Rodrigo Vergara called for calm over the slowdown in Chile’s economy, saying that gross domestic product is still expanding and that growth will accelerate next year.

Changes in monetary policy, which have pushed the key interest rate down 1.5 percentage points to 3.5 percent in the past year, have been a suitable response to the slowdown, he said.

Interest rates will probably fall in line with market expectations, Vergara said, adding that the economy was unlikely to contract. GDP rose 1.9 in the second quarter from a year earlier, down from 2.4 percent in the first quarter and 4.1 percent last year.

Manufacturing has contracted in nine of the past 12 months, while retail sales rose at the slowest pace in almost five years in July.

The central bank this week cut its growth forecast for 2014 for the fourth consecutive quarter. Policy makers said GDP will expand 1.75 percent to 2.25 percent, compared with the previous estimate of 2.5 percent to 3.5 percent.

Finance Minister Alberto Arenas, who has called for a public, private alliance to boost growth, said that economic growth would accelerate by about 1.5 percentage points next year.

The government has cut its 2014 growth forecast twice this year to 3.2 percent, citing a steep slowdown in domestic demand. The government of former President Sebastian Pinera, which left office in March, had forecast growth of 4.9 percent.

This article was sourced from the September edition of Latam News, the monthly newsletter of the Australia-Latin America Business Council (www.alabc.com.au

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