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Chile Economy Grows Slowly as Government Readies Stimulus

Chile Economy Grows Slowly as Government Readies Stimulus

(Bloomberg) --

Chile’s economy picked up slowly in the second quarter as global trade uncertainties weighed on mining growth and the government readies more stimulus.

Gross domestic product expanded 0.8% in the March-June period compared to the first three months of the year. From a year ago, Chile’s economy grew 1.9% up from the 1.6% increase recorded in the first quarter, according to a central bank report published on Monday. Both readings were in line with the median estimates of economists surveyed by Bloomberg.

Chile’s economy has been undercut by factors such as uneven domestic demand and the U.S.-China trade war, which has weighed on the price of copper. That’s put the government’s goal of 3.2% GDP expansion this year further out of reach, and prompted Finance Minister Felipe Larrain to unveil measures aimed at boosting growth. Meanwhile, the central bank is poised to deliver its second benchmark interest rate cut this year in September.

Chile Economy Grows Slowly as Government Readies Stimulus

Read more: Chile Central Bank Sounds Alarm on Prices With Rate Cut in Play

Mining grew just 0.2% in the second quarter from a year ago, while domestic demand in the same period grew 1.8%, slowing down from a 2.6% revised reading in the first quarter. On the other hand, investment grew 4.8% year-on-year, up from a revised 3.2% previously.

“Positive economic growth and recovering investment in the second quarter are good news and support expectations for activity to continue rising in the second half," said Felipe Hernandez, at Latin America economist with Bloomberg Economics. "But, decelerating private consumption and falling exports point to downside risks from weak domestic and external demand. Policy makers are likely to maintain expansionary monetary and their dovish bias."

Amid prospects of a weak recovery, President Sebastian Pinera’s administration announced plans to construct thousands of miles of roads in efforts to create jobs and spur investment. The government’s tax modernization bill, also meant to boost investment and cut red tape, is still advancing in Congress.

Chile’s GDP expanded 4% in 2018 on the back of increases in mining and investments. That was more than three times the prior year’s expansion.

To contact the reporter on this story: Daniela Guzman in Santiago at dguzman26@bloomberg.net

To contact the editors responsible for this story: Walter Brandimarte at wbrandimarte@bloomberg.net, ;Juan Pablo Spinetto at jspinetto@bloomberg.net, Matthew Malinowski

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