By Nathan Gill

Oct. 27 (Bloomberg) — Chilean Finance Minister Andres Velasco said the country’s economy should have a “vigorous” recovery after it suffered its worst slump in at least a decade.

Forecasts for 2010 economic growth are improving and Chile’s labor market is recovering as consumption expands and demand for the country’s exports grows, Velasco said today in a speech in Santiago.

Chilean economists raised their 2010 economic growth forecast to 4.3 percent in a monthly central bank survey published Oct. 13, up from 3.6 percent a month earlier. Velasco has predicted Chile’s economy, South America’s fifth-largest, will grow 5 percent next year.

“There are good conditions today to predict a vigorous rebound,” Velasco said. “Signals of recovery in the labor market are auspicious, but we still have a long way to go.”

Chile’s economy shrank in the first two quarters of this year and unemployment hit a five-year high after prices for exports plunged, led by copper, and domestic demand evaporated.

The rebound is being led by industries benefiting from the government’s $4 billion fiscal stimulus plan, Velasco said. Construction, real estate and retail sales have rebounded and Chile will export more than $1 billion in global services this year, he said.

Exports from Chile, the world’s largest copper producer, have gained market share during the global crisis and are poised to respond to a resumption in global demand, the finance minister said.

Chile’s peso strengthened 0.6 percent to 531.25