SANTIAGO, June 16 (Reuters) - The corporate credit scenario in Chile has deteriorated in recent quarters as the economy has weakened, but the country’s financial system is operating normally, the central bank said on Monday.
The economy of the globe’s top copper producer has been slowing for several quarters on the back of cooling domestic demand - particularly investment, but also increasingly consumption.
“Growth of corporate and consumer credit has fallen, in line with a weaker economy,” the bank said in its bi-annual Financial Stability report.
Debt levels at Chilean companies remain high by historical standards and profitability continued to wane, it said, adding that the less favorable economic cycle could imply a higher credit risk for non-financial companies.
However, in the financial sector stress tests indicate banks’ capital levels were enough to withstand a “severe deterioration” of growth and financing conditions, it added.
Larger companies are responding to tougher credit conditions by becoming more creative in their financing. Santander Chile , for instance, has recently pursued debt issuance in Australia and Japan.
With the economy expanding at its slowest quarterly pace in January to March since a devastating earthquake slammed the Andean nation at the beginning of 2010, the bank, as expected, cut its 2014 growth forecast and raised its inflation view in a separate report on Monday. (Reporting by Anthony Esposito and Antonio de la Jara; Editing by Richard Chang)