Chile: uncertain outlook

An uncertain outlook for the US economy and a tight energy supply overshadow the prospects for the Chilean economy in 2008.

Until recently, it was anticipated that, in 2008, the Chilean economy would maintain its positive performance in 2007 when GDP growth reached an estimated 5.2%, up from 4.0% in 2006. However, private forecasts became increasingly cautious during December, reflecting concern about a slowdown or recession in the United States.

• In 2007, exports reached an estimated 70.0 billion dollars, up from 58.1 billion dollars in 2006. This increase was largely explained by record prices for copper. Possible slower US growth means that commodity prices could moderate. Moreover, exports targeting the US construction market have already reported a sharp fall.
• After opening in 2007 at 532 pesos per dollar, the exchange rate dropped to below 500 pesos, with non-copper exporters complaining that the appreciation is undermining their international competitiveness.

Since 2004, Argentina has imposed increasing restrictions on exports of natural gas of which it is, at present, Chile's only source. This raised costs for households and for manufacturers and electricity generators, who have had to switch to more expensive oil-based fuels. These pressures will persist at least until 2009 when a liquid natural gas terminal is scheduled to start operation.