Chile: National GDP would expand by 1.5%, one of the worst performances globally

RIO DE JANEIRO, BRAZIL – The Chilean Government tried to play down the drama of the low growth that the Chilean economy will have this year, according to the latest projection of the International Monetary Fund.

The organization estimated that the national GDP would expand by 1.5%, which would place Chile as one of the four worst-performing countries in the region.

The Ministry of Finance started the tax reform discussion and pointed out that the scenario of poor growth does not compromise this project.

International organizations continue to update their projections regarding the economy’s evolution this year, and there seems to be an increasingly clear consensus about Chile: low growth.

The IMF updated its estimates this time, forecasting that the Chilean economy will grow 1.5% this year, below the 1.9% expected in January.

For analysts, the scenario is clear, and several reasons have to do with a demanding basis for comparison, inflation that forces consumption to cool down, and uncertainty that slows down investment.

The external scenario also worsens, which explains why world growth is also revised downwards to 3.6%. However, the most relevant for the Chilean case is still at the local level, according to Raimundo Soto of the UC Economics Institute.

That is a scenario shared by experts in general, especially pointing to the government’s readjustment hypothesis. The economist of Rojas & Asociados, Patricio Rojas, also thinks that, although it was expected that there would even be a recession this year, the concern should be focused on 2023, where there would be a 0.5% growth.

He points to the weak investment prospects that, beyond the adjustment, are not showing the necessary strength to reactivate an economy that is being held back by factors such as the CC and the doubts about the government’s agenda.

One of the concerns is tax reform. In this regard, the Government kicked off this initiative that will be key for the economic plan. A call was made to participate in the so-called social dialogues until the end of May.

In a year when the new Constitution will be voted, and the minimum wage will be raised to CLP 400,000 (US$490), the Minister of Finance, Mario Marcel, says that it is essential to clear up doubts regarding taxes beyond the moment the economy is going through.

Of course, this is viewed with concern by the business community invited to participate in this launching. Richard Von Appen, president of Sofofa, was there and made this call to combine tax changes with investment incentives.

One of the most worrying points is that looking at the figures, Chile is below the average growth of the region (2.5%) and is among the four lowest growth rates.

In Latin America, this growth of 1.5% is tied with Venezuela, and only Brazil will grow less, with 0.8%, and Paraguay with 0.3%.