## IMF Executive Board Concludes 2021 Article IV Consultation with Chile _IMF News, April 23, 2021_ ## Source details **Canonical URL:** [IMF Executive Board Concludes 2021 Article IV Consultation with Chile](https://www.imf.org/en/news/articles/2021/04/23/pr21113-chile-imf-executive-board-concludes-2021-article-iv-consultation-with-chile) ## Other formats - [Markdown version](/en/news/articles/2021/04/23/pr21113-chile-imf-executive-board-concludes-2021-article-iv-consultation-with-chile/index.md) - [Structured JSON version](/en/news/articles/2021/04/23/pr21113-chile-imf-executive-board-concludes-2021-article-iv-consultation-with-chile/index.json) - [Bundle manifest](/en/news/articles/2021/04/23/pr21113-chile-imf-executive-board-concludes-2021-article-iv-consultation-with-chile/bundle-manifest.json) ## Bibliographic details - Published: April 23, 2021 --- ### Overview and context - Executive Board discussion concluded on April 19, 2021. - The pandemic hit Chile as it was recovering from social unrest in October 2019. - Economic activity is projected to have declined by 5.8 percent in 2020, about 7 percentage points below staff’s pre-pandemic projection. - Inflation has hovered around the central bank’s target of 3 percent and inflation expectations remain well-anchored. - Employment contracted by 20.6 percent in mid-2020 and has partially recovered but remains below its pre-pandemic level. - At end-March 2021, rapidly increasing COVID‑19 cases led to tightened mobility restrictions; vaccination rollout proceeding expeditiously. ### Policy response - Fiscal: - Government implementing a multi-year fiscal package amounting to about 13 percent of GDP focused on safeguarding health, protecting incomes and jobs, and facilitating credit, refinancing, and repayments. - Monetary: - Central Bank introduced unconventional measures including funding-for-lending facilities, asset purchase programs, and an expanded collateral framework to support liquidity. - Financial sector: - Policies to facilitate credit flow to households and SMEs, including relaxing liquidity requirements and facilitating issuance and placement of securities. - External: - IMF’s Flexible Credit Line has contributed to the ability to withstand external stress. - Exchange rate allowed to freely float and act as a shock absorber. ### Economic outlook and projections - Short and medium term: - Economic activity is expected to grow at 6.5 percent in 2021 as pandemic fallout recedes and mobility restrictions are relaxed. - Over the medium term, growth is projected to converge to its potential of 2.5 percent. - Current account balance expected to remain close to zero in 2021 and gradually move toward a small deficit over the medium term. - Key projection series (annual percentage change unless otherwise specified): - Real GDP: 2018: 3.7; 2019: 1.0; 2020: -5.8; 2021: 6.5; 2022: 2.7; 2023: 2.6; 2024: 2.5 - Total domestic demand: 2018: 4.5; 2019: 0.9; 2020: -9.3; 2021: 8.8; 2022: 3.8; 2023: 2.8; 2024: 2.4 - Investment: 2018: 7.3; 2019: -17.7; 2020: 8.5; 2021: 3.6 - Exports: 2018: -2.6; 2019: -1.1; 2020: -12.8; 2021: 9.1 - Imports: 2018: 8.1; 2019: -2.3; 2020: -11.2; 2021: 6.2 - Unemployment rate (annual average): 2018: 7.4; 2019: 10.8; 2020: 8.2; 2021: 7.7 - Inflation (End of period, %): 2018: 2.1; 2019: 3.0; 2020: 2.9 - Central government fiscal balance (% of GDP): 2018: -1.7; 2019: -2.9; 2020: -7.3; 2021: -3.3; 2022: -1.6; 2023: ... - Central Government Gross Debt (% of GDP): 2018: 28.2; 2019: 32.5; 2020: 33.9; 2021: 37.2; 2022: 39.9; 2023: 41.6; 2024: 42.0; 2025: 41.7 - Public sector gross debt (% of GDP): 2018: 45.5; 2019: 49.1; 2020: 55.2; 2021: 56.5; 2022: 59.8; 2023: 62.5; 2024: 64.2; 2025: 64.7; 2026: 64.3 - Current account (% of GDP): 2019: -0.5; 2020: -0.8; 2021: ... - Gross international reserves (in billions of U.S. dollars): 2019: 40.7; 2020: 39.2; 2021 (proj): 48.2; 2022: 51.2 - Gross Reserves (Months of next year import): 2019: 5.9; 2020: 7.0; 2021: 6.8 - Gross external debt (% of GDP) series: 2018: 59.1; 2019: 66.4; 2020: 72.0; 2021: 64.1; 2022: 63.5; 2023: 63.0; 2024: 62.6; 2025: 61.6; 2026: 60.5 ### Risks and resilience - Main risks: - External: dynamics of the pandemic; movements in the price of copper affecting exports, fiscal revenues, investment, and growth. - Domestic: a series of elections and the outcome of a New Constitution process scheduled to finish in mid-2022, which may shape public discourse and influence the policy agenda. - Resilience factors: - Large policy response, remaining fiscal space, and strong institutional policy framework. - Fast pace of vaccination program expected to contain pandemic-related risks. ### Executive Board assessment and policy recommendations - General: - Directors recognized that strong policies enabled a swift response to health and economic impact, including rapid vaccine rollout. - Although recovery is beginning, uncertainties remain; continued strong policies and structural reforms are key to mitigating pandemic impact and supporting inclusive growth. - Fiscal policy: - Commended fiscal efforts while noting Chile maintains a very strong fiscal position. - As recovery strengthens, recommended medium‑term revenue and targeted spending measures to address social needs, protect the vulnerable, and rebuild buffers while preserving debt sustainability. - Encouraged steps to strengthen the fiscal rule and revisit exemptions, deductions, and special regimes; increase direct taxation; and raise green taxes towards international standards. - Social safety nets and pensions: - Highlighted that further pension withdrawals should be avoided as they have weakened the pension system. - Recommended that additional support, if needed, be delivered via targeted fiscal measures to better reach those in need. - Monetary and financial: - Welcomed Central Bank’s conventional and unconventional liquidity-support measures. - Urged continued close monitoring of financial sector vulnerabilities and resumption of financial sector reforms as recovery advances. - Structural reforms: - Stressed urgency of broad agreements to unlock structural and social reforms to invigorate confidence, support recovery and growth, and promote social cohesion. - Specifically emphasized the need for comprehensive pension and health reforms. - Noted that improving education quality and financial integration, reducing labor market inefficiencies and informality, promoting trade integration, and responding to climate change will be crucial to foster productivity and inclusiveness. ### Selected social and economic indicators (level and memoranda) - GDP (2019), in billions of pesos: 196,397 - GDP (2019), in billions of U.S. dollars: 279.3 - Quota (in millions of SDRs): 1,744 - Per capita (2019), U.S. dollars: 14,621 - Quota (in % of total): 0.37 - Population (2019), in millions: 19.1 - Poverty rate (2017): 8.60 - Main products and exports: Copper - Gini coefficient (2017): 46.60 - Key export markets: China, Euro area, U.S. - Literacy rate (2015): 99.2 - Nominal GDP (in billions of pesos) series: 190,722; 200,224; 220,091; 234,225; 246,285; 258,473; 271,219; 285,428 - Nominal GDP (in billions of USD) series: 297.4; 252.8; 308.8; 328.2; 345.2; 362.4; 379.9; 399.2 *IMF Press Release No. 21/113 — IMF Executive Board Concludes 2021 Article IV Consultation with Chile* --- ## References - [https://www.imf.org/-/media/images/imf/bios/imfboard.jpg](https://www.imf.org/-/media/images/imf/bios/imfboard.jpg) - [The Executive Board](https://www.imf.org/external/np/sec/memdir/eds.aspx) - [Chile and the IMF](http://www.imf.org/external/country/CHL/index.htm) - [IMF Policy Advice -- A Factsheet](https://www.imf.org/en/about/factsheets/imf-surveillance) - [Press Releases](https://www.imf.org/en/news/searchnews) - [PRESS CENTER](http://presscenter.imf.org/) - [http://www.IMF.org/external/np/sec/misc/qualifiers.htm](http://www.imf.org/external/np/sec/misc/qualifiers.htm) - [https://www.imf.org/en/home](https://www.imf.org/en/home) _Source: https://www.imf.org/en/news/articles/2021/04/23/pr21113-chile-imf-executive-board-concludes-2021-article-iv-consultation-with-chile_