The International Monetary Fund (IMF) on Wednesday said it expected Chilean economic growth to slow to 5.3 percent next year from 5.8 percent in 2007, but said the economy was well placed to weather external shocks.

In a Chile country report, the IMF said it would revise its inflation forecasts for Chile upward, and now saw year-end inflation of around 5.5 percent in 2007, easing to around 3.0 percent in 2008.

The IMF said it expected the central bank to tighten monetary policy further in the coming months as excess capacity is absorbed and as the economy continues to rebound from a poor performance in 2006.

The Washington-based body said the impact of recent turbulence in financial markets had been "relatively mild" in Chile and that the country's financial system was strong.

However, it warned that the risks to the Chilean economy were greater now than in May, when IMF officials visited the country.

"The recovery from the unexpected slowdown in the third quarter of 2006 remains broad based, and we believe growth will reach close to 6 percent in 2007 and remain around the potential rate of 5 percent next year," it said.

"Nevertheless, the risks to the outlook are now more on the downside given uncertainties about the global financial system, the U.S. outlook and investors' risk appetite, including for emerging markets."

The IMF also gave a forecast for Chilean copper production, which accounts for more than half its export revenue and makes up a third of global supply.

It said it saw Chile's copper output growing at about 3 percent per year over the medium term, rebounding after supply concerns in recent years.

"Labor disputes and technical problems slowed production in 2006, but completion of several labor contracts and investment projects should propel output toward its projected medium-term growth rate of 3 percent per year," the IMF said.

International Monetary Fund Inflation