General

Under the influence of high inflation and tightening monetary policy in major economies in Europe and the United States, especially under the influence of the spillover effect of the Fed's continuous aggressive interest rate hikes, major Latin American economies are facing severe challenges such as rising inflation, depreciation of local currencies, and capital outflows. Great downward pressure.

A series of data released recently showed that the economies of major Latin American economies such as Brazil and Argentina achieved growth in the first half of this year, but the growth rate slowed down significantly compared with the same period last year.

Chile was once a showcase for political stability and economic orthodoxy in Latin America. But in fact, Chile's National Statistics Institute (INE) announced that the consumer price index (CPI) rose strongly by 0.8% in July.

The INE report shows that clothing and footwear have declined, with growth in transport (1.7%) and non-alcoholic food and beverages (1%) particularly prominent, with cumulative annual inflation over the past 12 months reaching 4.5%, the highest rate since March 2016. the highest record. It is reported that Chile's central bank wants to raise the inflation rate again, reducing it to 1%.

Meanwhile, the Bureau of Statistics expects inflation to hit 0.6 percent amid more volatile factors such as food and energy.

Analysts pointed out that the Chilean peso has depreciated significantly against the dollar in recent months due to a certain degree of political instability and less copper purchases by China, which means that our inflation forecast of 12% for the whole of this year will not be met. expected.

“It’s not sensational that Chile is in stagflation,” said economist and former central bank governor Roberto Saler, apparently referring to the economic downturn and double-digit inflation.

"All indications are that by the middle of this year our economy will grow by 2 percent, which is not bad, but next year if inflation remains high, Chile's GDP is likely to decline," he said. trend."

Up to now, the Chilean central bank has continuously raised interest rates to curb inflation, and experts expect the central bank to continue raising interest rates. Economist Martina Orgas said: "Given the country's economic development, policy rates are expected to rise further, with the central bank likely to continue raising rates to between 10.5% and 11% in September and October."

The Organization for Economic Co-operation and Development (OECD) pointed out in a report that Chile's economic growth rate in 2022 was significantly lowered to 1.4% from 3.5% given in December last year. By 2023, Chilean GDP will grow by just 0.1%, 1.9 percentage points lower than forecasts six months ago.

Inflation in Chile will moderate in 2023, but energy prices "will remain high" due to the EU embargo on Russian oil, the OECD said. On the other hand, private investment in Chile will also continue to show "weakness" due to "uncertainty and higher interest rates caused by issues related to the new constitution."