Private Consumption: We expect a modest decline in the share of household consumption in the coming years, forecasting a drop from --.- of GDP in ---- to --.- by ----. The economy will still be heavily reliant on household consump- tion growth, where we see significant upside in the coming years as Chilean households benefit from higher paying jobs in non-mining industries. ...Over the next -- years, we expect this to grow to --.- . Rising levels of investment and consumption will provide tailwinds to the government s tax take and encourage the implementation of social spending programmes, most notably Bachelet s upcoming government-funded education system. Gross Fixed Capital Formation: With investment set to be a key driver of growth over the coming decade, we anticipate it will play an increasingly important role in the country s GDP composition. ...Though Chile will begin to export more non-copper goods, imports will also begin to rise due to higher disposable income from Chilean households.
...Over the coming years, Chilean manufacturing output will expand as a weak peso increases cost competitiveness. Chile s industrial base has long struggled with price competitiveness, as hard currency inflows from copper exports supported a strong real exchange rate. ...Chile s industrial base has long struggled with price competitiveness, as hard currency inflows from copper exports supported a strong real exchange rate. We forecast copper prices, a key determinant of the exchange rate, to continue falling through ----, averaging USD-,---/tonne compared to USD-,---/tonne in ----, and to climb only modestly thereafter (see Copper: Ample Supply To Delay Rebound, October --, ----). As such, we expect the Chilean peso will remain well below the levels seen over the last decade (see CLP: Copper Headwinds Exacerbating Depre- ciation, September --, ----), providing substantial tailwinds to manufacturers. ...Chile s manufacturing sector is currently dominated by consumer goods and intermediate goods such as plastics. Over the coming years, we expect Chile s manufacturing base to diversify, particularly among higher value-added sectors that require skilled labour, such as in the technology space.
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