Boston, MA -- (ReleaseWire) -- 05/01/2014 -- We retain our cautious outlook on Chile's freight transport sector, and the economy as a whole, largely on the back of the slowdown in Chinese growth and its demand for copper. We believe that weaker fixed investment in Chile amidst mounting external headwinds - such as the aforementioned cooling external demand for copper - will negatively affect real GDP growth in Chile in 2014. We expect that expansionary fiscal and monetary policies by the Chilean government will provide some support for the economy, underpinning our forecast for headline growth of 4.2% in 2014, only slightly down from estimated growth of 4.3% in 2013.
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Over the next several years the China slowdown will result in weakening real demand for Chilean copper exports and reduced investment into the country's mining sector, which will have the effect of depressing road, rail and maritime dry bulk freight volumes.
Lower copper prices will place renewed importance on shifting away from export- and investment-led growth to a more diversified economic growth trajectory, one that is more reliant on private consumption. If private consumption takes an increased share of Chile's economy, we may see increased growth in air freight, as well as in maritime container volumes, as both freight modes are used to carry consumer goods. Rail freight, however, will be hit hard by a move away from mining, as will gross tonnage volumes at Chilean ports.
Headline Industry Data
- Air freight tonnage is forecast to rise by 7.0% in 2014 to reach 330,400 tonnes.
- Total tonnes at the port of Valparaiso are forecast to rise by 1.7%, to 10.57mn tonnes in 2014, with average growth of 3.0% over the medium term to 2018.
- Rail freight tonnage is forecast to grow by 0.5% in 2014, reaching 26.17mn tonnes, with average growth of 0.9% over the next five years.
Key Industry Trends
Port Infrastructure Investments Support Growth Forecast: Considerable investment in the expansion of Valparaiso Port confirms our positive outlook on Chile's ports infrastructure and the wider construction industry. We maintain our positive outlook on Chile's construction industry on the back of an investorfriendly business environment, political stability, and a strong pipeline of projects. Although we estimate a moderate slowdown in real growth for 2013 and 2014 to 4.7% and 5.6% respectively - compared to a high 8.1% in 2012 - this is still a promising outlook. In addition, we expect the Chilean construction industry value to more than double in the next decade, reaching US$51.5bn by the end of our 10-year forecast period in 2023.
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