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Chile Finance Minister Velasco Says Economy Stabilized, Will Improve

By Nathan Gill
Aug. 21 (Bloomberg) -- Chilean Finance Minister Andres Velasco said the country’s economy has touched bottom and will show improvement in the third quarter as it emerges from its deepest recession in over a decade.

The contraction of Chile’s gross domestic product, which began last year and has seen consecutive quarters of negative growth, has stabilized, Velasco said today in Santiago.

The central bank last week voted to pause for the first time this year after cutting interest rates for seven straight months, saying that economic activity and industrial output suggest GDP may have already stopped shrinking.

“Monthly indicators from June show a slight recovery compared with a month earlier and today, practically all the forecasts, both foreign and Chilean, public and private, suggest a reactivation in the third quarter,” Velasco said after a speech at Chile’s Catholic University.

Chile’s GDP shrank 4.5 percent in the second quarter, the most in two decades, from the same period a year earlier, the central bank reported Aug. 18 in a report. The economy contracted 2.3 percent in the first quarter, the bank said.

Central bank policy makers, led by President Jose De Gregorio, over the course of seven monthly meetings beginning in January, cut their overnight rate from 8.25 percent to 0.5 percent, before electing to pause at its Aug. 13 meeting.

The peso strengthened 0.2 percent to 545.75 per U.S. dollar today from 547.00 yesterday, extending its gain this year to 17 percent, the third-best performance against the dollar among 26 emerging market currencies tracked by Bloomberg.

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