UPDATE 4-Chile 2012 GDP growth 5.6 pct, speeds up in last quarter
* Chile Q4 GDP growth up 5.7 percent year on year
* Exuberant domestic demand, current account deficit worry
* Brisk pace of growth seen continuing this year
(Adds details on forecast 2013 growth, analyst quote) SANTIAGO, March 18 (Reuters) - Chile's economic growth sped up in the last quarter of 2012 boosted by ebullient domestic demand, and clocked a robust 5.6 percent expansion for all of last year, the central bank said on Monday. The economy is forecast to post strong growth again this year, stirring concern over overheating among some experts worried that local consumption and a widening current account balance of payments deficit are unsustainable. In December, the central bank said it saw Chile's economy expanding between 4.25 percent and 5.25 percent this year, though that forecast is expected to be upwardly revised when it releases its quarterly Monetary Policy Report (IPoM) next month. In the fourth quarter of last year, Chile's economy grew 1.5 percent from the third quarter in 2012, compared with 1.2 percent expansion in the third quarter from second quarter, underlining the world No.1 copper producer's brisk growth despite fears of a slowdown. Growth in the fourth quarter was 5.7 percent compared with the year-earlier quarter, versus an upwardly revised 5.8 percent in the third quarter compared with the year-earlier period. GDP growth slowed negligibly from a downwardly revised 5.9 percent in 2011 and from an also downwardly revised 5.8 percent growth in 2010, positioning Chile as one of the fastest-growing countries in Latin America. "GDP was boosted by all the economic activities with the exception of the farm and forestry sector, which posted a drop," the central bank said in its statement. "Business services was the area that most contributed to GDP growth, while retail, personal services, mining and construction also registered significant increases," the bank added. Chile's 2012 growth is far above Latin America's average expansion, which the United Nations forecast at 3.1 percent. Last year, regional giants Brazil and Mexico posted 0.9 percent and 3.2 percent growth respectively, though Chile's growth was upstaged by a 6.3 percent expansion in neighbor Peru.
In addition to mining copper, export-dependent Chile also produces wood products, fruits, wine and salmon.
Domestic demand continued to boost the economy in the last quarter of last year, when it jumped 8.2 percent year-on-year. It increased 7.1 percent in full-year 2012, led by consumption, whose growth was mainly fueled by home spending. Investment also contributed significantly, thanks to the strength of gross fixed capital formation, the bank added. "We remain concerned about the extent to which growth has become dependent on the strength of domestic demand," Capital Economics said in a note to clients. "We expect a slower pace of credit growth and a tighter fiscal stance to take some of the steam out of consumer spending and domestic demand growth this year." Chile's current account deficit grew roughly three-fold last year to $9.497 billion, equivalent to 3.5 percent of annual GDP, as the surplus in the nation's trade balance fell sharply. Analysts have flagged Chile's growing current account deficit as a worry. Export revenue slipped 3.9 percent last year to $78.277 billion due mainly to lower metal, wood pulp and food prices. Shipments in the key mining sector, which accounted for nearly 60 percent of total export revenue, fell 5.2 percent on lower prices for top export copper, even as volumes increased. Almost half of Chilean exports in 2012 were destined to Asia, 18 percent to Europe, 15 percent within South America and 12 percent to the United States. Total imports increased 5.6 percent to $79.468 billion on higher volumes. Initially feted for withstanding softer demand from top trade partner China, the Andean country is now at risk of overheating on the back of unsustainable domestic consumption, according to some analysts. Neither the central bank nor the government have used the word 'overheating,' though the bank said earlier this month that domestic risks had become "more important" in the short-term. The bank has kept its key interest rate pat since a surprise cut to 5 percent in January 2012, but its wait-and-see-stance has become trickier in recent weeks. Buoyant growth and low inflation at home versus persistent economic threats from abroad have kept its hands tied, though traders polled by the bank see the rate creeping up to 5.25 percent in 12 months and analysts polled by the bank see it at that level within 11 months.
(Reporting by Santiago and Bangalore newsrooms; Writing by Anthony Esposito and Alexandra Ulmer; Editing by W Simon)