Chile's government will have to adjust its forecasts for the economy as prices for top export copper have slumped to 6-1/2 year lows, Finance Minister Rodrigo Valdes said on Thursday. Copper prices weakened on Thursday on concerns a drop in the oil price foreshadowed weaker global economic growth, though a recovery in Chinese shares helped prices to steady out later in the day.
Despite diversifying its economy in recent years, Chile still remains very dependent on copper, with the red metal accounting for half of all its exports last year. "We assumed that copper prices would be around $2.50 per pound this year and that's looking very unlikely. At the end of the day, this means there will be fewer fiscal resources," said Valdes.
Three-month copper on the London Metal Exchange on Thursday closed at about $2 per pound. Chile's independent central bank sees the economy growing between 2 percent to 3 percent in 2016 and annual inflation remaining above its target ceiling of 4 percent for most of the year.
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