( * ) core inflation ( * ) ( annual change, percent ) ( annual change, percent ) 11 12 13 14 15 16 17 18 19 11 12 13 14 15 16 17 18 19 dec. 2016 report mar. 2017 report ( * ) the grey area, starting from the first quarter of 2017, corresponds to the forecast. sources : central bank of chile and national statistics institute. 6. activity has been somewhat weaker than expected. according to recent data the output gap is currently larger than we anticipated in december. gdp grew by 1. 6 % in 2016, in line with what was anticipated. however, revised national account data suggests the economy was somewhat stronger towards the beginning of 2016 and weaker towards the end of the year, leaving a low starting point for 2017 and a higher base of comparison for the beginning of the year. the new data also point to weakness in investment - related areas and in sectors that tend to be more persistent, such as business services ( figure 4 ). figure 4 gdp non - natural resources gdp ( annual change, percent ) ( annual change, percent ) construction wholesale and retail trade rest personal services total manufacturing - 2 - 2 - 2 - 4 natural resources - 2 business services - 4 - 4 - 4 source : central bank of chile. 7. on the expenditure side, domestic demand — excluding changes in inventories — also tended to decelerate throughout last year. weakness was most evident in investment in construction and other works, which contracted by 4. 9 % in annual terms during the fourth quarter ( average growth of 0. 5 % between the first and third quarters ). 8. private consumption, in line with its behavior in previous years, provided support to the economy, growing by more than 2 % annually throughout 2016, on the basis of wage growth and a low unemployment. however, it should be noted that while consumption of nondurables and services has remained relatively stable, durable goods have recovered, partly due to the appreciation of the peso during the last year and the necessary replenishment of inventories following several years of weak growth and even contraction. something similar is observed with gross fixed capital formation in machinery and equipment. excluding the purchase of non - regular transport machinery, this component of investment has improved in recent months. 9. in our baseline scenario, gross fixed capital formation should experience a slightly positive growth in 2017, after three consecutive years of contraction. a key factor in the negative figures of the last few years is the ending of the mining

downward biased for output, and unbiased for inflation. the greater risk originates abroad, because of the situation in the eurozone. this is very complex and the developments of recent months have revived the possibility of more extreme scenarios. most importantly, economic and financial problems in the region could be worked out in a costly and disorderly manner, for example with greece leaving the monetary union. despite its small size within the eurozone, such an outcome could inflict severe damage on the rest of the world if there is contagion to bigger european economies. the macroeconomic and financial situation of spain continues to spur doubts, as reflected in the steady increase in its risk premiums. the lack of clarity about the capitalization plan announced for the spanish banking industry, its difficulties to meet the fiscal targets given the gloomy growth outlook and its impact on its sovereign debt are still cause for concern. similarly, apprehensions have increased about other countries in the region, such as italy, because of the bulk of its public debt and its slow growth. the coupling of risk premiums in spain, italy and france provides evidence of this risk. also possible is a reversal of current tensions, for instance if there are agreements favoring compliance with the adjustment measures agreed or new announcements of support by economic authorities in the zone, bis central bankers ’ speeches that could buy time to advance in the necessary structural changes. the outcome of yesterday ’ s elections in greece where the winner was the political option whose program is more in line with the country staying in the eurozone, mitigates somewhat the eventuality of a greek default triggering a crisis in the rest of the eurozone. however, it is still premature to draw any conclusions. but undoubtedly the coming days will bring important news and we must be watchful of its effects on our economy. additionally, other events will bring new information. more detail about the capitalization plan of spain ’ s banks and the ec meeting later in the month may shed some light on new bailout measures. other risks have to do with world growth prospects beyond the eurozone. doubts persist in the u. s. about how the transition to a sustainable medium - and long - term debt trajectory will proceed. special attention is due to the possibility that political difficulties to reach agreements on the fiscal front could trigger the automatic adjustments foreseen towards 2013, hurting its gdp growth. in the emerging world, a sharper and / or longer chinese slowdown than foreseen in the baseline scenario cannot