Chile flag Chile: Economic and Political Overview

The economic context of Chile

Economic Indicators

Chile, recognized as a high-income economy by the World Bank, has traditionally relied on export-oriented sectors such as mining, agriculture, and forestry, complemented by a stable financial framework. In 2023, the GDP growth rate experienced a modest decline of 0.5% compared to the preceding year, attributed to weakened domestic demand and constrained credit conditions, as reported by the IMF. However, Chile's economy is poised for a resurgence in 2024 and 2025, with growth rates projected at 1.6% and 2.3%, respectively. This anticipated recovery is underpinned by expectations of rising real wages, reduced interest rates, and sustained global demand for mineral exports. However, inherent risks such as a potential slowdown in China and climate-related adversities could impede growth dynamics, warranting vigilance and proactive economic management strategies.


On the fiscal side, after a robust consolidation in 2022 post the phase-out of COVID-related stimuli, the budgetary deficit reemerged in 2023 due to the economic slowdown and lower average mineral commodity prices, prompting reduced tax collection and higher financing costs. Expenditure surged due to increased pension payments and capital expenditures. The approval of a new mining royalty bill in May 2023, expected to collect annually roughly 0.45% of GDP when fully phased in, reflects efforts to shore up revenues amidst economic challenges. General Government Balance, a critical indicator of fiscal health, deteriorated in 2023, with the deficit widening to 3.4% of GDP, exceeding the IMF's projection of -2.3% for the year. Although the deficit is expected to marginally improve in 2024 and 2025, reaching -2.3% and -1.8% respectively, fiscal pressures persist. General Government Gross Debt also witnessed an upward trend, rising to 38.4% of GDP in 2023 and is projected to further increase to 41.2% and 42.4% in 2024 and 2025, highlighting challenges in debt management despite efforts to contain expenditures. Inflation has been a notable concern, with the rate reaching 7.8% in 2023, significantly above the target range. However, measures to address inflationary pressures are projected to bring it down to 3.6% in 2024 and stabilize at 3% in 2025. Monetary policy measures, though minimal, are expected to support these efforts, with cautious adjustments to policy rates anticipated to mitigate inflationary risks while sustaining economic growth.

Unemployment trends persist as a challenge, with the unemployment rate rising to 8.8% in 2023, reflecting labour market strains amidst economic uncertainties. Despite efforts to stimulate job creation, the unemployment rate is expected to persist above pre-pandemic levels, hovering around 9.0% in 2024 and gradually declining to 8.0% by 2026. Labour market conditions are further compounded by persistent levels of inequality. Although poverty rates have seen a decline, with the poverty rate dropping from 8% in 2020 to 4.8% in 2022, income inequality remains a concern. The Gini coefficient, a measure of income inequality, stood at 0.43 in 2022 according to World Bank data. These indicators underscore the need for sustained policy efforts to address income disparities and promote inclusive economic growth. Additionally, with GDP per capita (PPP) at USD 29,935 in 2023 according to IMF data (the highest in Latin America), ensuring equitable distribution of economic benefits remains paramount for achieving sustainable development and social cohesion.

 
Main Indicators 20222023 (E)2024 (E)2025 (E)2026 (E)
GDP (billions USD) 302.16335.66333.76374.75391.39
GDP (Constant Prices, Annual % Change) 2.10.22.02.52.4
GDP per Capita (USD) 15,23916,81616,61618,54619,258
General Government Balance (in % of GDP) -1.3-3.6-2.6-2.0-0.8
General Government Gross Debt (in % of GDP) 37.839.440.540.841.3
Inflation Rate (%) 11.67.63.23.03.0
Unemployment Rate (% of the Labour Force) 7.98.88.78.17.5
Current Account (billions USD) -26.16-11.90-13.16-13.71-13.91
Current Account (in % of GDP) -8.7-3.5-3.9-3.7-3.6

Source: IMF – World Economic Outlook Database, October 2021

Main Sectors of Industry

According to the latest data from the World Bank, the agricultural sector contributes 3.5% of Chilean GDP and employs 7% of the active population. Agriculture and livestock farming are the main activities in the central and southern parts of the country. Fruit and vegetable exports have reached historic records due to a deliberate strategy implemented in the 1990s targeting the European, North American and Asian markets. Chile is one of the biggest wine producers in the world and its location in the Southern Hemisphere allows the country to offer out-of-season fruits to countries of the Northern Hemisphere. In 2022, agriculture and related sectors represented 26.9% of total Chilean exports. Moreover, Chile has a developed food processing industry that generates USD 23.3 billion annually and is forecast to grow by 35% by 2030 (data U.S. Trade Administration).

Chile is among the most industrialised countries in Latin America and some of its key industries include mining (copper, coal and nitrate), manufactured products (food processing, chemicals, wood) and agriculture (fishing, viticulture and fruit). The industrial sector in Chile contributes 32% of GDP and employs 23% of the working population. The mining sector is one of the pillars of the Chilean economy, mainly due to large amounts of copper reserves, which make Chile the world's largest copper producer, responsible for over 1/3 of the global copper output. After five consecutive months of growth, industrial production in Chile declined by 2.7 % in December 2023 (data from the National Statistics Institute).

The services sector contributes 54.3% of GDP and employs around 70% of the population. The Chilean economy faces three main challenges: overcoming its traditional dependence on the price of copper, as copper production represents around half of the country's exports; developing a self-sufficient food supply, as agriculture currently produces less than half of domestic needs; and increasing its productivity, especially in the mining sector. The sector has been consistently growing in recent decades, reinforced by the rapid development of communication and information technology, access to education and an increase in specialist skills and knowledge among the workforce. Among the highest-growing sectors in recent years are tourism, retail and telecommunications.

 
Breakdown of Economic Activity By Sector Agriculture Industry Services
Employment By Sector (in % of Total Employment) 6.6 23.0 70.4
Value Added (in % of GDP) 3.5 32.0 54.3
Value Added (Annual % Change) 0.1 -1.7 5.2

Source: World Bank, Latest Available Data. Because of rounding, the sum of the percentages may be smaller/greater than 100%.

 

Find more information about your business sector on our service Market reports.

 
 

Find out all the exchange rates daily on our service International currency converter.

 

Indicator of Economic Freedom

Definition:

The Economic freedom index measure ten components of economic freedom, grouped into four broad categories or pillars of economic freedom: Rule of Law (property rights, freedom from corruption); Limited Government (fiscal freedom, government spending); Regulatory Efficiency (business freedom, labour freedom, monetary freedom); and Open Markets (trade freedom, investment freedom, financial freedom). Each of the freedoms within these four broad categories is individually scored on a scale of 0 to 100. A country’s overall economic freedom score is a simple average of its scores on the 10 individual freedoms.}}

Score:
75,2/100
World Rank:
19
Regional Rank:
2


 

Business environment ranking

Definition:

The business rankings model measures the quality or attractiveness of the business environment in the 82 countries covered by The Economist Intelligence Unit’s Country Forecast reports. It examines ten separate criteria or categories, covering the political environment, the macroeconomic environment, market opportunities, policy towards free enterprise and competition, policy towards foreign investment, foreign trade and exchange controls, taxes, financing, the labour market and infrastructure.

Score:
7.65/10
World Rank:
19/82

Source: The Economist Intelligence Unit - Business Environment Rankings 2020-2024

 

Country Risk

See the country risk analysis provided by Coface.
 

Return to top

Sources of General Economic Information

Ministries
Official Government website - list of ministries and public institutions (in Spanish)
Ministry of the Economy, Development and Tourism (in Spanish)
Ministry of Finance (in Spanish)
Ministry of Foreign Affairs (in Spanish)
Ministry of Public Works (in Spanish)
Statistical Office
National Institute of Statistics (in Spanish)
Central Bank
Central Bank of Chile
Stock Exchange
Santiago Stock Exchange
Economic Portals
Economic information portal of the Chilean Ministry of the Economy
Economy watch
Business News Americas
Focus Economics Chile
 

Return to top

Any Comment About This Content? Report It to Us.

 

© eexpand, All Rights Reserved.
Latest Update: April 2024