October 2, 2017 / 1:25 AM / in a year

Chile's Bachelet announces 3.9 pct spending hike in 2018 budget

SANTIAGO, Oct 1 (Reuters) - Chilean President Michelle Bachelet on Sunday announced a 3.9 percent hike to spending in the proposed budget for 2018, when she said the economy of the world’s top copper producer could expand twice as fast as this year.

Speaking in a broadcast speech, Bachelet said that next year’s spending will prioritize investments in infrastructure and education, key focuses of her center-left government.

“Economic forecasts are encouraging. In 2018 we could grow twice as much as in 2017,” Bachelet said, but added, “we must face this new scenario with the same responsibility as always.”

The spending hike is both higher than last year’s 2.7 percent increase and the 3.0 percent ceiling that the market had forecast for the 2018 budget.

Chile has long been one of Latin America’s most fiscally sound countries but the decline in copper-related revenues and spending under Bachelet has widened fiscal deficits and contributed to recent debt downgrades by rating agencies Fitch and S&P.

Chile’s economy has shown signs of recovery thanks to higher copper prices that could help the government shore up public finances.

The central bank recently estimated a 2.5 percent to 3.5 percent economic expansion for next year on mining investments and exports as well as expansive monetary policy. The bank has forecast this year’s economic growth at 1.25-1.75 percent.

Congress will begin debating the 2018 budget on Monday as the November presidential elections near with conservative Sebastian Pinera ahead of rivals in opinion polls.

Lawmakers in Chile usually approve the proposed budget’s sent by the executive branch. (Reporting by Fabian Cambero; Writing by Mitra Taj; Editing by Sandra Maler)

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