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UPDATE 2-Chile growth slows in April; rates seen on hold
June 5, 2012 / 2:11 PM / 5 years ago

UPDATE 2-Chile growth slows in April; rates seen on hold

 * Chile economy seen gradually slowing
 * Economy seen growing between 4 and 5 percent in 2012
 * Government monitoring liquidity
 * Credit conditions, liquidity still normal, says Fin Min

 (Adds finance minister's comments)	
 By Anthony Esposito and Alexandra Ulmer	
 SANTIAGO, June 5 (Reuters) - Chile's economic growth eased
in April from March, the central bank said on Tuesday,
reinforcing expectations that it will keep interest rates on
hold in coming months.	
 The euro zone's festering debt crisis, moderating growth in
China and a sputtering recovery in the United States are
weighing on Chile's small, export-dependent economy. The central
bank sees growth slowing to between 4 and 5 percent this year,
slowing from last year's 6 percent growth. 	
 The IMACEC economic activity index grew a seasonally
adjusted 0.5 percent in April from March, slowing its pace from
a revised 0.7 percent increase in March. Analysts polled by
Reuters had expected the pace of growth to slow. 	
 "This economy keeps growing, we've started the first four
months of the year in good standing ... But we also see signs of
deceleration ..., which is expected," Finance Minister Felipe
Larrain told reporters.	
 "We know that we have a very complex situation abroad,
particularly in Europe, but in other markets too," said Larrain.	
 Year-over-year, the IMACEC rose 4.8 percent in
April, coming in a whisker below market expectations for 4.9
percent growth and well below a revised 6.2 percent expansion in
April 2011 from the previous year. 
 	
 According to Larrain, the retail sector, double-digit growth
in construction, a recovery in the key mining sector, and
industry buoyed the IMACEC.           	
 "Basically the diagnosis of the economy hasn't changed,"
said Banco Penta chief economist Matias Madrid. "It's in a
process of deceleration, explained in part by slowing growth in
developed nations and some emerging nations.	
 "We expect this to continue and to near a rate of growth of
4 percent this year," he added. "We see interest rates on hold
for the rest of the year, and there is even a risk they could be
cut if the situation abroad worsens."	
 	
 Chile's economy has been bracing for a slowdown in global
demand, especially from China, its top trade partner and No. 1
copper consumer.	
 Traders no longer expect the Chilean central bank to raise
its key interest rate by year-end, according to the
bank's latest fortnightly poll. They now expect the rate to
remain steady at its current 5.0 percent in December and into
mid-2013. 	
 "Firm domestic demand growth against a backdrop of a tight
labor market - full employment - is likely to keep the central
bank from adopting an explicit easing bias given the
deteriorating external backdrop and decline in copper prices,"
Goldman Sachs analyst Alberto Ramos said in a note to investors.	
 The economy of Chile, the world's No. 1 copper producer,
should grow by 4.0 percent or more this year despite financial
turbulence in Europe, and the government is ready to activate an
economic contingency plan if liquidity is squeezed, President
Sebastian Pinera told the Reuters Latin America Investment
Summit on Friday. 	
 Larrain said that credit conditions and liquidity were
normal despite financial turbulence emanating from Europe and
that it wasn't yet necessary to implement the contingency plan.	
 The monthly IMACEC data, which the central bank calculates
in seasonally adjusted terms, measures more than 90 percent of
the components comprising Chile's gross domestic product, which
is published quarterly.	
	
 (Reporting by Santiago Newsroom; Editing by Simon Gardner and
James Dalgleish)	
 

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