Chile likely to post below trend growth in medium term

Given the Chile's weak trade data in October (exports dropped 17.9% yoy while imports fell 9.9% yoy) and no significant momentum in other monthly indicators towards the end of Q3, the economy is expected to grow at 2.1 pct y/y in Q3, according to estimates of Societe Generale. Sequentially, the economy likely grew by 0.3% qoq on seasonally adjusted basis. 

The economy is still not expanding at trend despite the significant counter-cyclical fiscal spending, which shows that fiscal easing is failing to have a significant impact on private domestic demand and that the external demand weakness is too strong to be offset by the fiscal or monetary easing. Therefore, the economy could fail to accelerate significantly in Q4.

"Given the structural slowdown in China and its continued downward impact on commodity demand and prices, we do not see external demand conditions improving for Chilean exports any time soon. As a result, we continue to expect timid, below-trend growth for Chile over the medium term", notes Societe Generale in a research report.