Chile: Central Bank Governor Vergara flagged increased risks, due to faster-than-expected growth.

Chile
Central Bank Governor Vergara flagged increased risks, due to faster-than-expected growth.

Central Bank Governor Rodrigo Vergara said that domestic demand, driven by both strong consumer spending and large investments in the mining industry, has been the driver of Chile’s rapid growth. He noted that mining investments accounted for less than 15% of total investment in 2003, and now accounts for 25% of total investments. Mining output’s share of GDP is 15%, while copper accounts for 60.0% of exports.

According to Mr. Vergara, rapid consumer spending has been supported by a record low (6%) unemployment rate and real wages that are growing 4% to 5% per year. In a nod to our view that the risk of overheating is increasing, Vergara noted that domestic risks have increased as output and demand indicators have exceeded expectations.