November 23, 2014 / 4:11 PM / 4 years ago

Chile central banker says economy to remain subdued in near term

SANTIAGO (Reuters) - Chile is unlikely to achieve a significant near-term economic recovery and inflation is poised to end the year well above the targeted 2-4 percent range, central bank vice-president Enrique Marshall said.

The economy of the world’s top copper producer has been slowing for several quarters, hampered initially by stagnating investment, most notably in the mining sector, and compounded by falling consumption. In July to September Chile it posted its weakest quarterly performance since the third quarter of 2009, when the economy was in recession.

“The economy is going through a period of very weak activity, it’s growing by less than 2 percent and we don’t see significant changes in the short term ... This weakness will continue during the first months of 2015,” Marshall told local daily El Mercurio in an interview published on Sunday.

Marshall suggested that the bank may downwardly revise its projection of a 3-4 percent expansion in gross domestic product for 2015 when it publishes its next quarterly Monetary Policy Report in December.

The government of socialist President Michelle Bachelet has forecast an economic recovery next year, expecting growth of 3.6 percent, partly through higher public spending.

“It’s perfectly possible for (growth) in 2015 to (accelerate) from less to more, but the first few months look weak, at least according to the data we now have available,” Marshall said.

The central bank board member also cited a “climate of uncertainty” that has dampened consumer and business sentiment.

Conservative lawmakers and business owners have said that Bachelet’s ambitious battery of social reforms, aimed at reducing Chile’s enormous income inequality, have served to heighten the uncertainty.

Marshall said that inflation, which recently surged to 5.7 percent, is likely to end the year near 5 percent. “What we see is annual inflation that has reached and will remain above the target range for months,” he said.

The bank’s most recent official forecast predicted inflation to be at 4.1 percent at the end of the year.

Reporting by Anthony Esposito; Editing by David Goodman

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