In a recent report released on Tuesday, Chile’s central bank highlighted the country’s ongoing economic recovery, tempered by lingering challenges in specific sectors and continued caution regarding financial market stability in the aftermath of the COVID-19 pandemic.
While acknowledging the positive trajectory of the economy, the bank emphasized that certain sectors such as commercial activities, construction, and real estate have shown slower progress, potentially increasing the risk of defaults within these industries.
A key concern highlighted by the bank was the persisting impact of the global economic environment on Chile’s financial stability. External factors, including uncertainty surrounding U.S. monetary policy and escalating global debt, were identified as ongoing risks that could influence local economic conditions.
Despite these challenges, the report noted improvements in the financial health of local businesses and individuals, attributing this trend to rising incomes and reduced financial burdens. However, the consumer sector has seen a slight uptick in mortgage payment defaults, albeit remaining at manageable levels.
Regarding inflation, the bank mentioned that Chile’s inflation rate, which spiked to 30-year highs in 2022, has been gradually converging towards the bank’s target of 3%. This development prompted the bank to lower its benchmark interest rate from 11.25% to the current 6.5%, aiming to support economic growth while maintaining price stability.
In a move to fortify the economy against potential future shocks, the central bank board recently decided to maintain capital requirements for risk assets at their current level, a strategy implemented since May of the previous year. This measure is intended to bolster the resilience of Chile’s economy, particularly in scenarios of severe economic stress.
The report underscored the importance of local agents and the domestic financial market enhancing their resilience to external macroeconomic risks. It called for continued vigilance and proactive measures to navigate the evolving global economic landscape while ensuring sustainable economic growth for Chile.
