SANTIAGO: Finance Minister Alberto Arenas has decided to pick up economy in 2015 and grow 3.6pc versus 2014 while presenting 2015 public spending budget plan.
The minister disclosed that the government’s spending will rise 9.8pc in 2015, the biggest increase since the 2009 recession, as the government aims to boost investment in education and healthcare to revive an economy growing at the slowest pace in more than four years.
Some 68pc of the total expenditure ($64.7bn) in 2015 has been dedicated to social spending for improving the quality of education, investments in health, housing, training and social security grants. Meanwhile a Bloomberg report reveals that Chile’s economy rebounded last December, rising 2.9pc from a year earlier while wages soared 7.2pc over the same period, the second-fastest pace since March 2009. The central bank estimated a growth of 2pc in 2014, compared with 4.1pc in 2013 but paints a much brighter outlook for 2015. It has cut its key interest rate eight times since October 2013, pushing it to 3pc, in an attempt to revive growth.
Chile is the world’s largest exporter and producer of copper with yearly output of 1.7m tonnes. Each one-cent increase in the price represents more than $40m in additional government revenue. The country has been increasing copper production in order to compensate for the drop in the price of copper. However, increased production contributes to further downward pressure on the price of copper. The fall in oil prices, the strengthening of the dollar in international markets and the gradual slowdown affecting China’s economy led the Chilean Copper Commission (Cochilco) to revise down its expectations for the average copper price in 2015, to $2.85/lb. Prices will average $2.80/lb in 2016, but should recover from 2018.
Some economists are of the opinion that the country’s copper exports were the highest in recent months that gave boost to year-end economic growth.The copper production is expected to be 6m tonnes this year. Economic growth is likely to pick up modestly in 2015 and 2016, driven by supportive monetary policy, expansionary fiscal policy and stronger external demand. Growth in domestic consumption has remained constrained. There are some indicators that point to stronger domestic demand but not sufficient to bring back strong overall economic growth. The central bank expects the economy to post growth of 2.5-3.5pc in 2015.