The latest report from Crédito y Caución warns that any serious disruption to global trade flows resulting from the trade war between the United States and China would affect Chilean exporters.
Despite having bilateral and multilateral free trade agreements with more than 60 countries to diversify the destinations of its exports, Chile's economy remains dependent on Chinese demand, especially regarding copper exports, which account for more than 40% of export revenues and 10% of GDP.
Chile's political stability remains high, supporting the country's credit solvency and positive sentiment in financial markets. GDP growth recovered in 2018, driven by higher copper prices and increased exports and investments. In 2019 and 2020, Crédito y Caución forecasts that economic expansion will remain solid, at around 3% GDP growth. The credit insurer predicts that inflation will remain within the Central Bank's targets, reflecting the structural soundness of macroeconomic policies.
The banking sector is well regulated and sufficiently capitalized. " The Chilean business environment remains one of the best in the region, and the government continues to encourage foreign investment. Good access to domestic and foreign capital for local companies reduces refinancing risks ," the report states.
Resilience to economic shocks remains strong, given the prudence of macroeconomic and financial policies. The flexibility of the exchange rate mitigates the impact of fluctuating copper prices and the volatility of external demand. Public administration debt remains low, at 24% of GDP, although it has increased by almost 20 percentage points in the last 10 years; 95% of the debt is denominated in pesos and is nationally owned. It is foreseeable that, in 2019 and 2020, the Government will maintain the trajectory of deficit reduction, which at the end of 2018 was 1,7%.
