LONDON, Oct 14 (Reuters) - Chile’s stimulus programme, which aims to increase public spending by a tenth next year, could be scaled down from 2016 if economic growth hits targets above 4 percent, the finance minister said on Tuesday.
The spending plan, unveiled in September to counteract a slowing economy, should not be seen as a permanent measure, Finance Minister Alberto Arenas said.
“If our forecasts are right and and in the year 2016, growth is 4.3 percent, then the assumption behind this fiscal policy is there will be a withdrawal of fiscal policy from public investment in 2016,” he told Reuters in an interview.
The spending plan was announced in Chile’s 2015 budget by President Michelle Bachelet as her government seeks to boost investment in education and healthcare in order to counteract a slowing economy.
Growth in the copper-producing nation has slowed to four-year lows and is expected to be 2 percent in 2014. The government predicts 3.6 percent growth next year, due in part to the planned public spending surge, with the rate increasing to above 4 percent in 2016.
TV interview with Arenas: reut.rs/1s9wvJU
Arenas said Chile’s public finances were currently on a sound footing, brushing off concerns that weak copper prices would put a strain on finances.
Funding plans could include raising money on debt markets Arenas said, but he declined to comment further.
The 2015 budget authorises the government to issue up to $8.0 billion in local and foreign debt.
He said that Chile would be able to issue debt at a competitive price, adding: “Right now we are in a strong fiscal position, we have low public debt...we can go to the markets and have a sovereign spread that is very low.”
Chile’s sovereign dollar bond yield spreads currently are around 160 basis points over U.S. Treasuries, among the lowest in emerging markets.
Arenas also said a falling copper price, driven in part by concerns about growth slowing in export market China would not affect spending plans.
Chinese demand for the metal remains stable and the budget is set using estimates of long term “structural” incomes, as opposed to “current incomes,” he said.
“Structural incomes define what you can spend. The constraint for public expenditure are structural incomes, not current incomes,” he said.
Editing by Angus MacSwan