September 5, 2018 / 4:16 PM / 9 months ago

UPDATE 1-Chile's Central Bank scales up GDP, investment, inflation outlook

(Adds further projections from bank and finance minister comments)

By Antonio De la Jara

Sept 5 (Reuters) - Chile’s Central Bank has scaled up its GDP outlook to between 4.0 and 4.5 percent for 2018 from a previous projection of 3.25 to 4 percent, accompanied by gradually rising inflation, it said on Wednesday.

The bank said its optimism flowed from an economic growth rate of 4.8 percent in the first half of the year, despite global turbulence caused by the U.S.-China trade war which has seen a drop in the peso and copper price.

The bank also predicted that domestic demand would grow by 4.6 percent in 2018, then 3.7 percent in 2019, with investment rising by 5.0 percent in 2018 and 4.5 percent in 2019.

Robust domestic demand, and higher projected consumer spending, comes even though the unemployment rate rose to 7.3 percent in the three months to July, which the bank said would come under further pressure given high rates of immigration from Venezuela and other Latin nations.

The increased dynamism in the domestic market, coupled with a weaker peso, also prompted the bank to predict a rise in inflation to top its 3.0 per cent goal, reaching 3.1 percent by the end of the year and returning to 3.0 per cent in 2019. The bank said as a result, it would consider raising interest rates “in the coming months.”

Reacting to the latest projections, which were presented to congress by the bank’s president on Wednesday afternoon, Chilean finance minister Felipe Larrain told journalists the country was defying external crosswinds.

“The risks of the trade war between the United States and China are now clearer and pose a significantly more demanding scenario for growth,” he said.

“We always stressed that Chile’s economy was not immune to those risks, but it is well-prepared to face them and is at present showing a significant resilience amid external shocks.” (Reporting by Antonio de la Jara; writing by Aislinn Laing; Editing by David Gregorio)

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