Economic Outline

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. After a modest 0.2% expansion in 2023, real GDP growth in 2024 accelerated to 2.2%. Growth was uneven, with the mining and utilities sectors (16% of GDP) performing strongly in the first three quarters due to resolved mining supply issues and growth in renewable energy. Other sectors, especially construction, grew more slowly, reflecting cyclical adjustments and limited potential in non-mining industries. On the expenditure side, growth was mainly driven by net exports, while consumption and investment remained weak. Real GDP is expected to grow around 2-2.5% in 2025 and the medium term, driven by a recovery in domestic demand and continued growth in mining exports (data IMF).

Concerning public finances, the fiscal deficit for 2024 was estimated at 2.7% of GDP, 0.8% higher than budgeted. Revenue fell short, mainly due to weaker corporate income tax collection, possibly from post-pandemic shifts, and lower VAT from slow domestic demand recovery. Lithium revenues also missed projections due to a sharp price drop. In response, the government cut spending, especially in Q4 2024. The government aims to reduce the fiscal deficit to 1.1% of GDP in 2025 and 0.5% in 2026, although the target seems hard to reach. The debt-to-GDP ratio increased marginally to 41% in 2024, up by 0.6% y-o-y, and is expected to follow an upward trend over the forecast horizon (IMF). Headline inflation increased from 3.4% in December 2023 to 4.5% in December 2024. Non-core inflation drove this rise, primarily due to a 43% increase in regulated household electricity prices (2.2% of the CPI basket) between June and October, following a freeze from 2019 to 2023. The Central Bank continued easing monetary policy, reducing its policy rate from 8.25% at the end of 2023 to 5.0% in December 2024, with a slower pace since June. Long-term rates remain high, reflecting the persistent elevated rates in the U.S. Inflation is projected to return to the 3% target by early 2026, as the impact of electricity tariff hikes fades and service inflation declines.

The labour market remains weaker than pre-pandemic levels. In 2024, employment growth slowed, and labour participation and unemployment rates have yet to return to 2019 levels. Factors contributing to this include cyclical weakness in labour-intensive sectors like construction, a significant rise in real minimum wages, lower labour force participation from seniors and youths, and new labour regulations, such as the gradual reduction of work hours from 45 to 40 hours per week. Overall, real wages rose by 4.1% year-on-year in November 2024. For the year as a whole, the IMF estimated the unemployment rate at 8.5%, with a marginal reduction expected this year (8%). Although poverty rates have seen a decline, with the poverty rate dropping from 8% in 2020 to 5% in 2024, income inequality remains a concern. The Gini coefficient, a measure of income inequality, stood at 0.43 in 2024 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 34,789 in 2024 according to IMF data (the highest in Latin America), ensuring equitable distribution of economic benefits remains paramount for achieving sustainable development and social cohesion.

Any Comment About This Content? Report It to Us.