Banco Central de Chile lowered its 2017 growth forecast for the country to between 1.0% and 1.75%, from the previous range of between 1% and 2%, and said the average consumer price index inflation will converge to 3% by year-end 2017.
First-quarter activity was virtually flat compared to a year ago, though sectors linked to building investment remain very weak, according to the central bank's quarterly monetary policy report. The central bank noted the revision reflects a greater-than-expected drop in mining output early in 2017, though it expects this should recover in 2018, which should contribute to higher GDP growth of between 2.5% and 3.5% for the next year.
The central bank also does not expect substantive changes in its inflation outlook, as annual CPI variation has remained at 2.7% since February. Meanwhile, private consumption has shown increased stability, amid some improvements in an otherwise pessimistic scenario.
Chile's labor market has also seen adjustments in line with projections. The country's unemployment rate is historically still low, although salaried employment and remunerations have steadily decelerated from late 2016. However, the central bank noted indicators in the labor market suggest deterioration in economic and financial indicators for households, such as in nonpayment indicators, El Mercurio reported.
The regulator also argued for the implementation of a new labor law so as to ensure a minimum level of available services in the financial system, in case of strikes, Diario Financiero reported separately. The central bank suggested implementing the minimum service level requirement to financial firms like cooperatives, insurers and banks.