{
  "title": "IMF Executive Board Concludes 2023 Article IV Consultation with Chile",
  "publication": "IMF News, February 6, 2024",
  "sourceUrl": "https://www.imf.org/en/news/articles/2024/02/06/pr2438-chile-imf-exec-board-concludes-2023-art-iv-consult",
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  "summary": "The Executive Board of the International Monetary Fund (IMF) concluded on February 5, 2024, the Article IV consultation with Chile",
  "publishDate": "2024-02-06",
  "sections": [
    {
      "heading": "Summary",
      "content": "- The Executive Board concluded the Article IV consultation with Chile on February 5, 2024.\n- Macroeconomic imbalances built during the pandemic have been largely resolved, supported by tighter macroeconomic policies deployed during late 2021-22.\n- As domestic demand normalized, economic activity stabilized in the second half of 2023, yielding an estimated zero percent real GDP growth for the year.\n- Inflation and current account deficits have significantly declined in 2023.\n- The financial sector remains resilient despite the economic slowdown and tight financial conditions.\n- Closure of the constitutional reform process is expected to reduce near- and medium-term domestic uncertainty.\n- Chile has comparative advantages for the global green transition due to endowments in copper, lithium, and renewable energy."
    },
    {
      "heading": "Economic outlook and projections",
      "content": "- Growth projections:\n  - 2023: 0.0 (real GDP annual percentage change)\n  - 2024: 1.9\n  - 2025: 2.5\n  - Medium term: 2-2.5 percent (text)\n  - 2022 (for reference): 2.4\n- Inflation projections:\n  - Change of CPI (period average): 2023: 7.6; 2024: 3.3\n  - Change of CPI (end of period): 2023: 12.8; 2024: 3.0 (table shows 12.8 for 2022 and 3.0 for 2023 in the table layout)\n  - Inflation is projected to converge to the 3-percent target in 2024.\n- Output gap (in percent):\n  - 2022: 2.7\n  - 2023: 0.2\n  - 2024: -0.3\n  - 2025: -0.1\n- Employment / unemployment rate (annual average):\n  - 2022: 7.9\n  - 2023: 8.8\n  - 2024: 8.9\n  - 2025: 8.4\n  - 2026: 7.7\n- Balance of payments:\n  - Current account balance (% of GDP):\n    - 2022: -9.0\n    - 2023: -3.2\n    - 2024 (Proj.): -3.4\n    - 2025 (Proj.): -3.3\n  - Foreign direct investment net flows:\n    - 2022: -2.7\n    - 2023: -1.8\n    - 2024 (Proj.): -2.2\n  - Gross external debt (% of GDP):\n    - 2022: 77.6\n    - 2023: 73.1\n    - 2024 (Proj.): 74.4\n    - 2025 (Proj.): 74.1\n    - 2026 (Proj.): 74.2"
    },
    {
      "heading": "Fiscal and monetary policy",
      "content": "- Monetary policy:\n  - In the context of disinflation acceleration, the Central Bank of Chile lowered the monetary policy rate by 400 basis points since July 2023.\n  - Directors emphasized that the pace of further monetary easing should remain data dependent.\n  - Directors called for resuming international reserve accumulation when market conditions are conducive and for developing a long‑term reserve strategy (with a few calling for an earlier resumption).\n- Fiscal policy:\n  - The headline fiscal balance is estimated to decline to about -2.5 percent of GDP in 2023 due to weaker tax revenues, lower copper prices, and other transitory factors.\n  - The 2024 budget envisions a moderate deficit reduction within a medium-term fiscal plan to a broadly balanced fiscal position by 2026.\n  - Directors welcomed the authorities’ commitment to reach a broadly balanced fiscal position by 2026 and keep debt below the prudent debt ceiling of 45 percent of GDP.\n  - Central government fiscal indicators (in percent of GDP):\n    - Central government revenue: 2022: 26.1; 2023: 23.1; 2024 (Proj.): 23.8; 2025 (Proj.): 24.0\n    - Central government expenditure: 2022: 25.0; 2023: 25.6; 2024 (Proj.): 25.9; 2025 (Proj.): 25.4; 2026 (Proj.): 24.5\n    - Central government fiscal balance: 2022: 1.1; 2023: -2.5; 2024 (Proj.): -2.1; 2025 (Proj.): -1.4; 2026 (Proj.): -0.5\n    - Central government gross debt: 2022: 38.0; 2023: 39.2; 2024 (Proj.): 40.5; 2025 (Proj.): 40.7; 2026 (Proj.): 41.1\n    - Public sector gross debt1/: 2022: 67.3; 2023: 68.5; 2024 (Proj.): 69.8; 2025 (Proj.): 70.0; 2026 (Proj.): 70.4"
    },
    {
      "heading": "Financial sector resilience and reforms",
      "content": "- Directors agreed that the financial sector remains resilient.\n- Ongoing and recommended measures:\n  - Implementation of Basel III capital and liquidity requirements is ongoing.\n  - Activation of the countercyclical capital buffer will strengthen financial resilience in periods of stress.\n  - Efforts to establish an industry‑funded deposit insurance and a new bank resolution framework are underway.\n  - Directors called for continued monitoring of vulnerabilities in construction and real estate sectors.\n  - Directors stressed the importance of continuing to adapt financial regulation and supervision to the changing financial sector landscape."
    },
    {
      "heading": "Risks and structural opportunities",
      "content": "- Key external risks:\n  - Uncertainties around potentially higher‑for‑longer interest rates in advanced economies.\n  - Growth slowdown in major trading partners.\n  - Intensification of regional conflicts.\n- Key domestic risks:\n  - Political polarization and fragmentation could lead to continued reform gridlock.\n  - Social discontent over inequality and the security situation remains prevalent.\n  - Uncertainty related to the solvency of private health insurance companies.\n- Upside opportunities:\n  - Closure of the constitutional reform process could reduce uncertainty.\n  - Global demand for copper, lithium, and renewable energy presents opportunities; directors stressed swift implementation of a clear and balanced institutional framework to capitalize on higher global demand for lithium and other critical minerals.\n  - Directors welcomed efforts to foster investment, streamline permitting processes, and Chile’s progress in developing renewable energy.\n  - Directors noted improvements in gender equality and encouraged additional efforts to further narrow labor market gender gaps."
    },
    {
      "heading": "Executive Board assessment and policy recommendations",
      "content": "- Condolences were expressed for lives lost and devastation caused by massive forest fires.\n- Directors welcomed the authorities’ very strong policies and policy frameworks and the support from the precautionary FCL arrangement.\n- Directors commended reform plans aimed at:\n  - Raising investment and productivity.\n  - Increasing fiscal revenues for priority spending.\n  - Reducing inequality.\n  - Improving pension adequacy.\n  - Transitioning to a greener economy.\n- Fiscal recommendations:\n  - Additional measures will be needed to achieve the authorities’ medium‑term fiscal plan and finance social needs and security priorities.\n  - Support for proposed reforms to strengthen tax compliance and enhance spending efficiency.\n  - Emphasis on raising pension contribution rates to ensure adequacy of self‑financed pensions and sustainability of the pension system.\n  - Encouragement to further refine an already strong fiscal framework.\n- Monetary and external sector recommendations:\n  - Pace of monetary easing should be data dependent.\n  - Maintain a flexible exchange rate to absorb shocks.\n  - Resume international reserve accumulation when market conditions allow and develop a long‑term reserve strategy.\n- Financial sector recommendations:\n  - Continue implementing Basel III, the countercyclical buffer, deposit insurance, and a new bank resolution framework.\n  - Monitor construction and real estate vulnerabilities.\n- Structural reforms:\n  - Foster investment, streamline permitting, implement a clear institutional framework for mining and critical minerals, and continue efforts to narrow gender gaps in the labor market."
    },
    {
      "heading": "Key country facts and indicators",
      "content": "- GDP (2022), in billions of pesos: 263\n- GDP (2022), in billions of U.S. dollars: 301\n- Quota in millions of SDRs: 1,744\n- Per capita (2022), U.S. dollars: 15,166\n- Quota (in % of total): 0.37\n- Population (2022), in millions: 19.8\n- Main products and exports: Copper\n- Key export markets: China, Euro area, U.S.\n- Money and Credit:\n  - M2 growth: 2022: 4.0; 2023: 5.3; 2024 (Proj.): 4.8; 2025 (Proj.): 6.2; 2026 (Proj.): 5.8\n  - Credit to the private sector: 2022: 10.0; 2023: 2.8; 2024 (Proj.): 5.0; 2025 (Proj.): 7.1; 2026 (Proj.): 6.7\n\nIMF Executive Board Concludes 2023 Article IV Consultation with Chile, February 6, 2024.\n\n---\n\n\n References\n\n- https://www.imf.org/-/media/images/imf/bios/imfboard.jpg\n- The Executive Board\n- Chile and the IMF\n- IMF Policy Advice -- A Factsheet\n- Press Releases\n- PRESS CENTER\n- http://www.IMF.org/external/np/sec/misc/qualifiers.htm\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2024/02/06/pr2438-chile-imf-exec-board-concludes-2023-art-iv-consult"
    }
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    "Published: February 6, 2024",
    "The Executive Board concluded the Article IV consultation with Chile on February 5, 2024.",
    "Macroeconomic imbalances built during the pandemic have been largely resolved, supported by tighter macroeconomic policies deployed during late 2021-22.",
    "As domestic demand normalized, economic activity stabilized in the second half of 2023, yielding an estimated zero percent real GDP growth for the year.",
    "Inflation and current account deficits have significantly declined in 2023.",
    "The financial sector remains resilient despite the economic slowdown and tight financial conditions.",
    "Closure of the constitutional reform process is expected to reduce near- and medium-term domestic uncertainty.",
    "Chile has comparative advantages for the global green transition due to endowments in copper, lithium, and renewable energy.",
    "Growth projections:",
    "Inflation projections:",
    "Output gap (in percent):",
    "Employment / unemployment rate (annual average):",
    "Balance of payments:",
    "Monetary policy:",
    "Fiscal policy:",
    "Directors agreed that the financial sector remains resilient.",
    "Ongoing and recommended measures:",
    "Key external risks:",
    "Key domestic risks:",
    "Upside opportunities:",
    "Condolences were expressed for lives lost and devastation caused by massive forest fires.",
    "Directors welcomed the authorities’ very strong policies and policy frameworks and the support from the precautionary FCL arrangement.",
    "Directors commended reform plans aimed at:",
    "Fiscal recommendations:",
    "Monetary and external sector recommendations:",
    "Financial sector recommendations:",
    "Structural reforms:",
    "GDP (2022), in billions of pesos: 263",
    "GDP (2022), in billions of U.S. dollars: 301",
    "Quota in millions of SDRs: 1,744",
    "Per capita (2022), U.S. dollars: 15,166",
    "Quota (in % of total): 0.37",
    "Population (2022), in millions: 19.8",
    "Main products and exports: Copper",
    "Key export markets: China, Euro area, U.S.",
    "Money and Credit:",
    "[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)"
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