In this case, the global factors that have affected commodity prices are compounded with supply conditions that have had a major impact on prices over the last year and a half. Considering all these factors, the outlook for the price of crude oil in the next two years has been also reduced significantly, to an average of 46 dollars per WTI barrel and 48 dollars the Brent. In September we were projecting prices of 53 and 58 dollars for the two oils. For some months now, external financial conditions have been less favorable for the Chilean economy. The preamble to the US monetary policy rate adjustment caused significant volatility in financial markets. However, the increase of last week had a cool reaction of the markets. In Latin America the mix of worsened economic prospects and idiosyncratic factors has fueled the rise in risk premiums, but in Chile this rise has been smaller (figure 5). Moreover, the projected growth of our trading partners in the period 2016–2017 has been downscaled marginally compared to what we expected in September. The developed world, particularly the United States, shows a sustained recovery. Meanwhile, the emerging world has slowed further. In China, fears of a deeper slowdown and turmoil in financial markets have eased, but the Chinese economy has decelerated, with some weakness in the manufacturing sector. Latin America faces a complex situation, particularly Brazil which is going through its worst recession in decades. The loss of its investment grade last week reveals the difficulties of this economy.

As I said, the performance of the economy in the third quarter was similar to that of previous quarters, so it continued to grow between 2 and 2.5 percent annually. This result revealed a deeper than expected decline of natural resources, particularly mining, due to production downtime associated to the fall in the copper price. The performance of the other sectors was somewhat better, namely construction and some services. As for domestic demand, it is still growing weakly, although a little more than we foresaw in September. The increase in gross fixed capital formation, where specific factors combine, such as high imports of transport equipment, and stronger residential housing construction, is worth noting. Private consumption kept a growth rate of around 2 percent annually (figure 3). The performance of domestic demand reflects that business and consumer confidence indicators remain pessimistic, despite the resilience of the labor market and that GDP growth, while slow, has stabilized. The cost of domestic funding is still low by historical standards, partly reflecting the expansionary stance of monetary policy. Nonetheless, with the sole exception of mortgage loans, credit growth in real annual terms is still limited (figure 4). The baseline scenario assumes that GDP will grow between 2 and 3 percent in 2016, a lower range than forecast in September. This projection continues to estimate that the economy’s potential growth (i.e., the non-accelerating-inflation growth rate) lies around 3 percent. Accordingly, we believe that output gaps will exhibit limited growth in 2016 and will begin narrowing towards 2017.