UPDATE 1-Chile cuts forecast for GDP growth in 2013

Mon Jul 29, 2013 5:46pm EDT

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SANTIAGO, July 29 (Reuters) - Chile, the world's No. 1 copper producer, revised lower its forecast for full-year gross domestic product growth to 4.6 percent from 4.8 percent, reflecting cooling investment and a slowing economy for the export-dependent country.

The price of copper will fall to $3.28 per lb, from the $3.40 previously forecast, the country's budget office said on Monday. Copper accounts for more than half of Chile's export revenue

Public spending is seen rising by 5.9 percent in real terms in 2013 compared with last year, the budget office said.

Meanwhile domestic demand, which has helped buoy the economy of the world's No. 1 copper producer, is expected to grow 5.3 percent, compared with a prior view of 5.5 percent. In 2012, domestic demand grew 7.1 percent.

"After three years of elevated dynamism, the economy has started a deceleration phase in 2013 ... domestic demand maintains a faster rhythm than GDP, although it has also decelerated its growth," the budget office said.

The economy grew 5.6 percent last year, but growth eased in the first quarter of 2013 to 4.1 percent, the slowest pace since late 2011.

According to the new forecasts, annual inflation is expected to end the year at 2.8 percent, down from a previous view of 3.0 percent.

Earlier this month, the central bank hinted that a deepening of the country's economic slowdown could trigger a rate cut in coming months. The bank had previously reduced its forecasts for 2013 gross domestic product growth, inflation and domestic demand.

Traders see the bank holding its benchmark interest rate steady at 5.0 percent in August, but then cutting it by a quarter-percentage point within three months and another 25 basis points within six months.

Chile sees this year's structural fiscal deficit equal to 1.2 percent of GDP, the budget office added.

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