The International Monetary Fund (IMF) has concluded its 2024 Article IV mission to Chile, issuing a statement that outlines the country's current economic status and future prospects. The statement highlights that while economic imbalances have largely been resolved, challenges remain in various sectors.
Economic activity in Chile is growing at its potential, with a strengthening current account position. However, the recovery is uneven across industries, and inflationary pressures persist. Structural policy priorities are identified as boosting medium-term growth and employment, enhancing fiscal and financial sector buffers, and reducing inequality.
Real GDP growth is projected at 2.3% for 2024, supported by strong mining and service exports. Inflation is expected to stay above the target until early 2026 due to increased electricity tariffs. The unemployment rate remains high due to weak labor-intensive sectors like construction.
Externally, volatility in commodity prices linked to Chile's main trading partners poses risks. Domestically, crime, migration issues, and political polarization continue to be concerns.
Chile's convergence with higher-income economies has stalled over the past decade. To address this stagnation, there is an urgent need for greater economic dynamism to tackle social and fiscal pressures.
Digital technologies and artificial intelligence present opportunities for productivity enhancement in Chile but require careful management of distributional impacts. "Chile is among the most exposed to AI in Latin America," notes the IMF report.
The government aims for a balanced fiscal position by 2027 but faces challenges due to revenue underperformance. Additional policy measures equivalent to at least 1% of GDP are needed over three years to achieve this goal.
Pension reform remains crucial for ensuring adequate pensions amid population aging. Raising pension contribution rates is necessary for sustainability while considering targeted support for vulnerable elderly populations.
For monetary policy, achieving the 3% inflation target appears feasible with a cautious approach to rate cuts advised due to ongoing inflation pressures from currency depreciation and electricity tariff hikes.
The Central Bank of Chile's access to international liquidity plays a key role in resilience against external shocks. Financial sector policies must continue reinforcing resilience amid rising vulnerabilities related to real estate.
Continued implementation of Financial Sector Assessment Program recommendations will enhance resilience further while addressing gaps such as commercial real estate data and stress test models.
In conclusion, while progress has been made in stabilizing Chile's economy post-pandemic, significant structural reforms are necessary for sustained growth and stability moving forward.