A Concluding Statement describes the preliminary findings of IMF staff at the end of an official staff visit (or ‘mission’), in most cases to a member country. Missions are undertaken as part of regular (usually annual) consultations under Article IV of the IMF's Articles of Agreement, in the context of a request to use IMF resources (borrow from the IMF), as part of discussions of staff monitored programs, or as part of other staff monitoring of economic developments.
The authorities have consented to the publication of this statement. The views expressed in this statement are those of the IMF staff and do not necessarily represent the views of the IMF’s Executive Board. Based on the preliminary findings of this mission, staff will prepare a report that, subject to management approval, will be presented to the IMF Executive Board for discussion and decision.
Washington, DC:
Chile’s economy remains resilient, with the credibility of its strong policy institutions especially valuable in responding to yet another global shock and particularly important in tackling structural challenges. Should the war in the Middle East become protracted, near-term policy priorities include a readiness to tighten monetary policy to contain the impact on inflation within the central bank’s target horizon and providing fiscal support for the most vulnerable groups. Over the medium-term, policy priorities are to strengthen fiscal space and durably lift Chile’s growth, reflecting the government’s core objectives under its National Reconstruction Plan.
Economic activity, led by investment and exports in 2025, faces a period of elevated uncertainty.
The growth outlook for 2026-27 is supported by higher copper prices and production, though the surge in oil prices and tighter global financial conditions present headwinds. Real GDP growth is projected at 2.2 percent in 2026 and 2.5 percent in 2027, assuming improvements in external conditions and a gradual fiscal consolidation. Inflation is set to exceed the target temporarily in 2026 and early 2027 due to higher oil prices. Current account deficits are projected to narrow in 2026, driven by higher copper prices, before widening to 2-2.5 percent of GDP in the medium term as real copper prices revert toward the historical average.
Risks to growth are tilted to the downside in the near term and balanced over the medium term. Protracted hostilities in the Middle East could keep oil prices higher for longer and weigh heavily on growth through lower disposable income, disruptions to production, and tighter financial conditions. Other external downside risks include trade tensions and disorderly corrections in the outlook related to AI-led productivity gains. On the other hand, persistently high copper prices—due to structurally higher demand from the green transition, AI-related infrastructure, and defense spending—represent the key upside risk. Domestically, the government’s agenda to facilitate private investment and employment through cutting red tape, lowering labor costs, and reducing the corporate income tax (CIT) in a phased manner is set to support medium-term growth. Under an upside scenario, with sustained high copper prices in the US$ 5.5-6.0 per pound range and implementation of investment-enhancing reforms under the National Reconstruction Plan, IMF staff projects growth to reach around 3 percent during 2027-30, with more than half of the impulse associated with copper prices. However, across-the-board sharp public spending cuts, intended to offset revenue losses from tax reductions, risk limiting space for productivity-enhancing spending such as childcare. Amid persistent high inequality, social discontent also remains a risk.
Putting the fiscal position on a credible consolidation path would help ensure fiscal sustainability while enabling protection of the most vulnerable.
The new government has unveiled an ambitious plan to bolster Chile’s fiscal position. Under current policies, IMF staff projects the headline deficit in 2026 to reach about 2.5 percent of GDP. The identified expenditure cuts via administrative measures of around 0.5 percent of GDP in 2026 are incorporated in full in the IMF staff baseline. The quick and decisive capping of the oil price stabilization mechanism in favor of more targeted and less fiscally costly support underscores the government’s commitment to contain spending pressure. Nevertheless, the oil price shock will still weigh on the fiscal accounts.
Over the medium term, the government’s objective of reaching a broadly balanced structural position by 2030 and keeping the debt-to-GDP ratio below 45 percent is welcome. This will require cumulative fiscal efforts of 2-3 percentage points of GDP, given the starting point in 2025. Without such efforts, IMF staff projects the government debt-to-GDP ratio to move above 45 percent in 2028.
The authorities’ medium-term fiscal strategy includes further administrative spending cuts (0.3 percent of GDP) and a comprehensive tax and spending package as part of the National Reconstruction Plan, which they estimate to have a net fiscal cost of 0.2 percent of GDP by 2030, including the growth-enhancing impact of the reforms. On the expenditure side, the plan comprises, for example, curbing abuse of public-sector medical leave, reducing the size of the public workforce, and eliminating low-performing programs. On the revenue side, the main measures are intended to lift investment through a gradual reduction in the CIT rate from 27 to 23 percent, a tax credit targeting firms employing low-income workers, and a shift to a fully integrated tax system. Overall, even when considering the potential growth gains from the plan, which might be somewhat optimistic, additional fiscal consolidation efforts will be needed to reach the deficit and debt targets.
Against this background, the planned tax employment credit and gradual CIT rate reduction towards the OECD average, which carry the largest fiscal cost, have to be weighed against the need to preserve fiscal space, maintain productive public spending, and accommodate long-term spending pressures and external shocks. To facilitate managing this trade-off, consideration should be given to more targeted and less costly alternatives, such as accelerated expensing for capital expenditure, particularly in the non-mining sector, or narrower subsidies linked to new employment creation. The additional fiscal gap created by the new bill will need to be compensated by commensurate expenditure and/or revenue measures. The timing, size and design of policies not directly linked to the growth and employment goals, such as property tax exemptions, warrant reconsideration to limit fiscal pressure. Finally, the ongoing implementation of the Tax Compliance Law remains important, while projecting yields conservatively, considering recent revenue underperformance.
The ongoing and welcome efforts at achieving greater spending efficiency would ideally be embedded in a full-fledged spending review. Chile’s total public spending has increased in the past decade, especially in health, education and social protection, but remains relatively low compared to OECD peers. While Chile’s public spending on healthcare is reasonably efficient relative to peer countries there is room for absolute efficiency gains, for example through strengthening procurement processes. On tertiary education, public spending as a share of GDP now exceeds that of most OECD peers, and some measures under the National Reconstruction Plan are seeking needed efficiency gains. Continued efforts to create a one-stop service window and combine the fragmented social programs could improve their access, coverage, and efficacy. Targeting of the minimum guaranteed pension (PGU) could be improved to better protect low-income pensioners.
Chile’s fiscal framework provides the institutional backbone for sustainable fiscal policy making. And there is a premium on policy credibility in turbulent times. Nevertheless, there is scope for refinement to enhance the transparency, realism, and stability of the medium-term fiscal path within the dual fiscal rules. Aspects for technical adjustments include: the formulation of committed expenditure in the medium-term fiscal path, the operationalization of corrective actions following deviations from fiscal targets, the estimation of structural parameters related to trend GDP and benchmark copper prices, and the treatment of revisions to national accounts.
The central bank should stand ready to tighten monetary policy if the current shock creates second-round inflation effects.
Chile’s inflation targeting framework has consistently served it well through a sequence of shocks since the pandemic. The two-year inflation expectation remains well anchored, and the current monetary policy stance is broadly neutral. As higher oil prices and peso depreciation push inflation temporarily above target in 2026 and early 2027, this price spike would not, by itself, warrant a policy rate change. However, if oil prices stay much above the baseline for longer and add to inflationary pressures through second-round effects on wages and other prices, a tighter monetary policy stance would become necessary. Thus, the central bank’s approach of evaluating the monetary policy rate evolution meeting by meeting is welcome.
Completing the international reserve accumulation program is essential for resilience.
The central bank’s well-designed reserve accumulation program, launched in August 2025, has operated smoothly and has increased reserves by about US$4 billion by end-April. Completion of the three-year program remains a priority to bolster Chile’s external buffers and complement other sources of foreign exchange liquidity.
Financial sector policies need to continue reinforcing resilience, including a well-coordinated implementation of the pension reform.
The financial system remains sound and able to withstand a severe stress scenario. Banks have adequate levels of capital, liquidity, profitability, and provisions. Staff welcomes the completed implementation of the Basel III capital and liquidity requirements in 2025. Moving to a positive-neutral counter-cyclical capital buffer of 1.0 percent of risk-weighted assets from the current rate of 0.5 percent should be gradual and consider macro-financial developments and banks’ ability to lend, as intended by the central bank.
The financial vulnerability of households and corporates is low overall and reduced slightly in 2025. However, vulnerabilities remain in construction and real estate, smaller firms with government-guaranteed loans, and low-income indebted households. Despite the past mortgage subsidy program, the planned new housing support measures, and lower lending rates, which assist housing sales and ease financial burdens of real estate and construction firms, adjustments in these sectors may still take time given the elevated housing inventories. The risks related to pension funds’ increased exposure to U.S. interest rate swaps are being addressed by the Pension Supervisor, which recently amended the regulatory limit of derivative positions based on risk exposure.
The ongoing pension reform would benefit from a gradual and well-coordinated implementation to prevent abrupt portfolio reallocation. The increased contribution rate under the reform will deepen Chile’s capital market but the reform also poses implementation challenges, including the transition from the multi-fund system to a generational-fund system and introduction of new competition-enhancing mechanisms. The Pension Supervisor’s approach of explicitly considering market-impact mitigation in the design of the new investment regime, alongside improving its risk-return profile is welcome. It is recommended to prioritize a smooth transition, by making full use of the available implementation flexibility under the pension reform law, to mitigate sharp announcement effect and anticipatory trading behaviors by market participants.
Continued implementation of the 2021 FSAP recommendations and other resilience-enhancing measures remains important. Considerable advances have been made, including the implementation of the Financial Market Resilience Law and related regulatory amendments to support repo market development. The proposed expansion of access to the Real-Time Gross Settlement System to non-bank financial institutions will enhance systemic liquidity, while regulatory proposals on strengthening banks’ corporate governance and recovery planning will improve the risk management framework and crisis preparedness. Mandatory reporting to the Consolidated Debt Registry, started in April 2026, strengthens credit risk management, supervision, and monitoring of indebtedness for financial stability. In the digital currency area, the central bank’s plan to introduce prudential regulations for domestically issued stablecoins is welcome. Remaining priorities include creating an industry-funded deposit insurance, introducing a new Bank Resolution Law, and risk-based supervision of insurance companies. Granting budgetary independence to the Financial Market Commission would help ensure adequate resources as its responsibilities have expanded and become more complex.
Broad-based measures to boost growth, including by rationalizing regulations, are critical, though growth gains are likely to be gradual and their size is uncertain.
The government’s focus on durably lifting growth is important not only to raise citizens’ income but also to create space for addressing fiscal pressures related to an aging society and a more shock-prone world. Cross-country evidence suggests that trend growth of around 2 percent per year is a useful benchmark for an economy at Chile’s income level under current demographic and global conditions. This does not mean Chile should not aim higher. Rather, it highlights how challenging it is to raise trend growth and how important it is to maintain prudent revenue projections.
Ongoing policy efforts to expedite sectoral permits and environmental evaluations, improve coordination across ministries, provide greater regulatory certainty, clarify administrative rules for implementing the 40-hour workweek law, and maintain a competitive minimum wage, are welcome. There is also scope for productivity gains from stronger university-business R&D collaboration and key infrastructure improvements. A more investment friendly environment would also help narrow skill gaps by strengthening job creation in the industrial sector, thereby amplifying incentives for students to acquire STEM and other technical skills. The process of setting the minimum wage would benefit from greater input from an independent expert body to help align minimum wage decisions more firmly with economic fundamentals and insulate it from political cycles.
In the context of an aging population, relaxing the distortionary size-dependent childcare mandate and moving towards a more universal childcare system could raise female labor supply and productivity. This is in line with the 2023 “Marfan Commission Report,” which highlights the GDP and revenue gains from higher female labor participation. In addition, IMF analysis suggests that, compared to other OECD countries, highly educated women in Chile are less likely to work in high-paying occupations, indicating underemployment. Closing this gap to the OECD median could raise aggregate productivity by 3 percent through a better distribution of talent.
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The IMF mission team would like to thank the Chilean authorities and other counterparts for the open and constructive discussions and their hospitality.
