October 3, 2016 / 7:26 PM / a year ago

UPDATE 1-Chile sees growth recovering, points to 'orderly' finances

(Adds comments by finance minister, details and context on Chile’s economy)

SANTIAGO, Oct 3 (Reuters) - Chile’s economy is expected to recover from a weak 2016 to grow 2.25 percent in 2017, Finance Minister Rodrigo Valdes said on Monday, underlining his “orderly” approach to public finances on the back of an austere 2017 budget.

The government expects the economy of the top copper exporter to grow 1.75 percent in 2016, which would be the slowest expansion since a 2009 recession.

Last week, it announced one of the lowest spending rises in years for 2017, to the dismay of some lawmakers in what will be an election year.

The economy has struggled since 2014 as the price of copper has declined. That has complicated an ambitious reform drive by center-left President Michelle Bachelet.

Valdes has been finance minister since May 2015. An economist who is viewed as market-friendly, he has emphasized that the government will not abandon fiscal discipline in a country often lauded as one of Latin America’s most orthodox economically.

“This budget underlines that Chile maintains its idea of being orderly, a good student that looks after its finances,” he said in a post-budget presentation to lawmakers.

“The most important thing for international markets is to see an orderly country, that has a clear plan and that follows that plan.”

Financing reforms to education and pensions will nonetheless lead Chile’s fiscal deficit to deepen to 3.3 percent of gross domestic product from 3.1 percent this year, he said.

At a time of low global interest rates, the gap would be filled by debt issuance rather than tapping the country’s sovereign wealth funds, he added.

Last week, the government said it could issue up to $10.5 billion in debt next year.

Chile’s sovereign dollar bond yield spreads currently are around 181 basis points over U.S. Treasuries, considerably tighter than the emerging markets average. As of August, its rainy day sovereign wealth fund was worth some $14.6 billion.

Reporting by Antonio de la Jara; Writing by Rosalba O'Brien; Editing by Matthew Lewis

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