Chile Can Grow Faster – But it Won’t Be Like the 1990s Again

IMF News, June 24, 2025

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Chile grew 6.2 percent per year on average in the 1990s, but by the 2020s growth barely went above 2 percent.
Among 28 economies that crossed the US$26,000 real GDP per capita threshold between 1950 and 2010, median annual GDP growth over the subsequent decade was 2.9 percent.
Chile’s GDP per person tripled from US$8,200 in 1990 to around US$26,000 in 2025, in constant 2017 U.S. dollars after purchasing power parity (PPP) adjustment.
If Chile performed in line with the median comparator and current headwinds persisted, a long-term growth trend of around 1.9 percent is suggested.

Benchmark: higher-income countries that were once at a comparable income level to Chile grew at a rate of around 2.9 percent per year.
Context: sustaining rapid growth becomes harder as countries get richer because of diminishing gains from investment and less scope for technology catch-up.
Comparators: examples include Australia in the late 1980s and Korea in the 2000s.

Working-age population (15-64) projection: will grow by just 0.15 percent per year during 2025-35 (UN median projection).
Employment outlook: with modest gains in labor participation, employment will likely grow by 0.2-0.3 percent annually—below the 0.8 percent seen in the comparison group.
Demographic drag: this alone saps ¼ percentage point from Chile’s potential growth.
Global technological trend proxy: the comparison group benefited from a U.S. GDP growth rate of 3.1 percent per year on average; economists now expect U.S. growth of 2.1 percent for the next decade.
External drag estimation: a one-percentage point reduction in 10-year U.S. annual growth translates to a further 0.8 percentage point restraint on Chile’s potential growth.

Overall approach: short-run macroeconomic stimulus is not the answer; focus on deepening supply-side structural measures.
Regulatory efficiency:
- Example: it can take up to 10 years to sort out permits and navigate bureaucracy to get a large mining project off the ground.
- Recommendation: streamline lengthy permitting processes to reduce barriers to investment and support technology adoption.
- Recommendation: modernize regulations related to maritime transport to lower trade costs and improve competitiveness.
Labor participation:
- Recommendation: stimulate labor participation by improving access to quality childcare to enable more women to enter the labor force.
R&D and innovation:
- Fact: Chile’s R&D spending is substantially below the OECD average.
- Recommendation: foster greater public-private collaboration in R&D given limited budgetary resources.
- Policy support: the proposed technology transfer bill enabling university researchers to create tech companies and commercialize their work could help narrow the R&D gap.
Natural resources and green transition:
- Opportunity: Chile is the world’s largest copper producer and second largest lithium producer.
- Opportunity: Chile is richly endowed with solar and wind resources and can benefit from high global demand for critical minerals and low-cost renewable energy.

Build on Chile’s established track record of prudent macroeconomic management.
Prioritize reforms that:
- Accelerate investment approvals and reduce regulatory bottlenecks.
- Raise labor force participation, especially through childcare and gender-inclusive policies.
- Strengthen public-private R&D collaboration and commercialize university research.
- Leverage critical minerals and renewable energy endowments to capture global demand and support low-cost energy.
Rationale: together these reforms improve the chances of achieving stronger growth, which is critical for improving living standards and addressing social and fiscal pressures.

Source: Si Guo and Andrea Schaechter, June 24, 2025, International Monetary Fund