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CHILE: Itaú Says Structural Deficit Likely To Rise Above Target

CHILE
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  • Following the Budget Office’s presentation on the fiscal accounts through August, Itaú believes that the Ministry of Finance is likely to miss its structural deficit target this year. The combination of persistently weak revenues and strong spending have led to a cumulative nominal fiscal balance through August of 2.2% of GDP, above the MoF’s 2.0% forecast.
  • The fiscal balance tends to deteriorate significantly during the fourth quarter of every year, suggesting an even greater deficit by year-end. As such, the MoF is set to miss this year’s structural deficit target of 1.9% of GDP, further eroding the credibility of the fiscal institutional framework.
  • The MoF intends to issue $2.25bn in Q4 2024, completing the $16.5bn annual issuance plan. Considering that this is below the roughly $3.8bn in debt maturing in the period, financing shortfalls could be covered by slightly more debt issuance or additional withdrawals from the Stabilisation Fund. Itaú’s nominal deficit forecast of 2.3% of GDP for this year is biased to the upside.
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  • Following the Budget Office’s presentation on the fiscal accounts through August, Itaú believes that the Ministry of Finance is likely to miss its structural deficit target this year. The combination of persistently weak revenues and strong spending have led to a cumulative nominal fiscal balance through August of 2.2% of GDP, above the MoF’s 2.0% forecast.
  • The fiscal balance tends to deteriorate significantly during the fourth quarter of every year, suggesting an even greater deficit by year-end. As such, the MoF is set to miss this year’s structural deficit target of 1.9% of GDP, further eroding the credibility of the fiscal institutional framework.
  • The MoF intends to issue $2.25bn in Q4 2024, completing the $16.5bn annual issuance plan. Considering that this is below the roughly $3.8bn in debt maturing in the period, financing shortfalls could be covered by slightly more debt issuance or additional withdrawals from the Stabilisation Fund. Itaú’s nominal deficit forecast of 2.3% of GDP for this year is biased to the upside.