June 6, 2018 / 5:36 PM / a year ago

Chile aims to cut structural deficit to 1.8 pct in 2018

SANTIAGO, June 6 (Reuters) - Chile hopes to reduce its structural deficit to 1.8 percent of gross domestic product in 2018, finance minister Felipe Larrain said on Wednesday, as the government moves to tame a larger-than-expected deficit inherited from its predecessor.

Larrain said austerity measures, combined with expected growth in the economy, should knock 0.2 percent off the structural deficit each year, down to a goal of around 1.0 percent in 2022.

Chile’s structural deficit, an alternative measure of deficit accounting, incorporates a longer-term view of spending and revenues.

“We hope that the economy improves, and that it improves significantly, and that this be reflected in a reduction in public debt,” Larrain said at a news conference in Santiago.

Conservative President Sebastian Pinera, whose government took power in March, has called for a return to “fiscal equilibrium” in order to combat economic “stagnation” in the world’s top copper exporter.

Shortly before leaving office, the government of outgoing President Michelle Bachelet reported it had left a structural deficit of 2.1 percent of gross domestic product, instead of 1.7 percent as targeted.

Pinera’s government last month announced it would slash $1.15 billion from its budget in 2018 and a total of $4.6 billion through 2021.

Earlier this week, Pinera said he would keep the country’s corporate tax rate at the levels raised by Bachelet, reneging on a campaign promise. That was needed to help finance social programs while tamping down the deficit, he said. (Reporting by Antonio de la Jara, writing by Dave Sherwood; Editing by Rosalba O’Brien)

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