SANTIAGO, Apr 27 (Reuters) – Chile, the world’s largest copper producer, will benefit from the strong global recovery in metal prices, which will lead the economy to post an expansion greater than initially expected, as forecast on Tuesday by the government.
In a presentation of the Public Finance report before a Senate commission, the government projected that the Gross Domestic Product (GDP) will grow 6% this year, compared to the previous estimate of 5%.
The Minister of Finance, Rodrigo Cerda, said in his presentation that among the factors that will also contribute to a better performance is an expected faster recovery of the world economy and greater investment.
“This 6% for the year 2021 is in the lower part of the Central Bank’s range, but that allows us to gradually update as we see better news,” the official explained.
The forecast is in the lower part of the expansion range projected in March by the Central Bank of between 6 and 7%.
Chile’s fiscal rule contemplates that extraordinary income from increases in the price of copper is destined to the country’s sovereign savings to be used in times of crisis.
“What we have decided this year is that we are going to use that income and we are going to finance higher expenses,” he added.
Meanwhile, inflation would close at 3.4% – in line with the Central Bank – and above the previous 3.0% estimate.
Domestic demand would grow 10.7% this year, while the price of copper – the country’s largest export – would average $ 3.99 per pound.
In addition, an effective fiscal deficit of 3.8% of GDP is projected for 2021, while the structural deficit would reach 6%.
(Report by Fabián Andrés Cambero, edited by Gabriela Donoso)