Chile’s central bank reported that the economy is showing signs of recovery, but some sectors are still struggling to bounce back from the impact of the coronavirus pandemic. The commercial, construction, and real estate sectors have been slow to recover, increasing the risk of defaults in these areas.
Despite these challenges, local companies and individuals have improved their finances in general. Household finances have stabilized due to higher incomes and reduced financial burdens. However, external economic environment continues to pose threats to local financial stability.
The report emphasizes building resilience among local agents and strengthening domestic financial market to mitigate potential risks. Uncertainties related to U.S. monetary policy and global debt levels were also pointed out as additional concerns that could impact Chilean economy.
In response to economic challenges, the bank has lowered its benchmark interest rate from 11.25% to 6.5% as inflation rates have started to converge towards the bank’s target of 3%. Capital requirements for risk assets remain at same level since May last year, in order to enhance economy’s resilience in severe stress scenarios.
While there are signs of improvement in the economy, risks and challenges need to be addressed in order for sustained recovery and stability in Chile’s financial sector.
