© Reuters. FILE PHOTO: Chile’s Finance Minister Mario Marcel talks about reforming the tax system in front of a screen on “Pulse of the Economy” during a meeting with customers of state-owned banks in Santiago, Chile, July 8, 2022.REUTERS/Ivan Alvarado
SANTIAGO (Reuters) – The Chilean government sharply raised its inflation estimate for the country in 2022 on Tuesday, saying it is now expected to grow by 11.1 percent, compared with an earlier forecast of 8.9 percent.
The Andean central bank has been aggressively raising interest rates to curb soaring consumer prices, but economists described the outlook as “disturbing” after data last week showed inflation at the highest level since 1994.
The report by Finance Minister Mario Marcel also showed that Chile’s gross domestic product (GDP) is expected to grow by 1.6% this year, slightly higher than a previous estimate of 1.5%.
“In terms of GDP, there has been no significant change,” Marcel told a congressional committee, adding that mining GDP is expected to be negative this year.
“In the second half of the year, we will see more weakness in consumption and demand,” he said.
Chile’s currency devaluation and runaway inflation are testing the Andean giant’s economic and financial system and jeopardizing President Gabriel Boric’s push to pass a tax reform bill to fund ambitious social programs. complicated.
The government’s previous forecast dates back to May.
The South American nation, the world’s largest copper producer, also said on Tuesday that the price of the red metal is expected to hit $4.19 a pound in 2022, down from an earlier forecast of $4.45.
Meanwhile, domestic demand is now expected to grow by 1.3% in 2022, significantly higher than previous estimates of a 1% decline from last year.
The government forecast comes after Chile’s central bank said last month that the country’s economy would grow between 1.5% and 2.25% this year. For 2023, the bank forecasts a range between no growth and a 1% economic contraction.