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Scotiabank Say Economy Weakness Should Prompt Rate Cuts Soon

CHILE
  • Chile’s central bank released Q4 GDP data that showed a greater than expected decline in Y/y terms compared to the Bloomberg median and Scotiabank’s forecast.
  • The country’s economy slightly expanded vs the previous quarter, but the minor 0.1% expansion missed the 0.6% consensus forecasts. Chilean GDP expanded 2.4% last year, below Scotiabank’s forecast of 2.7% which they expect will be followed by a 0.8% decline in output in 2023 (prior to today’s data).
  • The weakening Chilean economy should prompt rate reductions from the BCCh soon according to their Santiago economists, who anticipate 675bps in cuts by year-end (from 11.25% to 4.50%) starting with next month’s decision.
  • On a more optimistic note for the currency, Chile’s current account deficit narrowed to USD5.0bn from USD7.5bn in Q3, and with this Q4 reading representing the narrowest deficit since Q2-21.
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