Chile: More moderate growth in Q3, but still above potential

Chile: More moderate growth in Q3, but still above potential

Florencia Vazquez - Market Economics
Latam Macro Snapshot | 19 Nov 2012 16:33 |

Real GDP in Chile was reported to have advanced 5.7% y/y in Q3 2012. The y/y pace of advance stood slightly ahead of the median estimate from the Bloomberg survey and a bit below our forecast (5.4% and 6.2%, respectively). In sequential terms, the economy expanded at a 5.7% q/q (saar) pace, having moderated from Q2’s unsustainable 8.3% pace (revised up from a previous 7%), but still slightly above potential (Chart 1).

We expect the moderation trend in place to have continued in Q4. Still, our forecast looks for a robust 5.6% y/y advance this year (revised slightly up from a previous 5.4% on revisions to past quarter’s performance). We then expect activity to remain soft near term before reaccelerating to an above-potential pace in H2 2013. The full-year real GDP forecast for 2013 stands at 4.5%.

The growth acceleration will likely fuel price pressures next year. Against this backdrop, the central bank is expected to embark on a gradual tightening cycle in 2013.

Details:

- Below the headline, domestic demand (up 8.0% y/y) remained the main driver of the economy in Q3 2012 (Chart 2). Private consumption accelerated a bit to be up at a 6.4% y/y pace while, in contrast, public spending growth moderated to 2.9% y/y last quarter. Gross fixed investment soared 19.9% y/y.

- Export performance was weak at -3.4% y/y in Q3 2012. And the pace of imports moderated to 2.5% y/y (Chart 3). The contribution from net trade thus remained in negative terrain last quarter.