Chile's central bank slashes growth forecasts as protests take toll

FILE PHOTO: The emblem of the Chilean Central Bank is seen on the main gate of the building in downtown Santiago August 25, 2014. REUTERS/Ivan Alvarado

SANTIAGO (Reuters) - Chile’s central bank slashed its economic growth forecasts for 2019 and 2020 on Thursday, warning that the effects of weeks of unrest would linger into next year.

The most violent, widespread protests to hit Chile since its return to democracy in 1990 have left at least 26 dead. The chaos has spooked investors and tourists, hobbled ports, highways and public transportation and caused billions in losses to business.

In its first quarterly financial outlook since the start of the protests, the bank chopped its estimate for growth in 2019 to 1% from a previous forecast of 2.25% to 2.75%, and its 2020 forecast to a range of 0.5% to 1.5% from 2.75% to 3.75% previously.

“The macroeconomic scenario suffered an abrupt change after mid-October,” the bank said in its report.

Rating agency Fitch on Wednesday said the impact of protests may push the Chilean economy into a technical recession, expecting a contraction in the current quarter and the next.

The bank boosted its year-end inflation forecast to 3.4%, from a previous 2.7 percent, and estimated the 2019 copper price would land at $2.70 per pound.

The bank said the end of protests and a slow recovery through 2020 could bode well for a return to normalcy in 2021.

“Headed into 2021, our base scenario projects GDP growth between 2.5% to 3.5%,” the bank said.

“This assumes the disruptions that are affecting the economy will begin to disappear over the coming quarters, as will the uncertainty that is affecting consumer and investment decisions.”

Reporting by Dave Sherwood; editing by John Stonestreet and Giles Elgood