Chile Faces Moderate Growth in 2025 Amid High Uncertainty, Warns IMF

The International Monetary Fund (IMF) released its final analysis on Chile’s economy in 2024. The IMF notes that while many imbalances have been resolved, internal and external risks persist.

Chile’s GDP grew by 2.2% in 2024. Projections for 2025 suggest an expansion between 2% and 2.5%. Inflation is expected to hit the 3% target by 2026, driven by electricity tariff normalization.

Recovery has been uneven across industries. The construction sector lags while unemployment remains high. The IMF warns, “Risks and uncertainty are still high.”

Factors include commodity price volatility, the green transition impact, and uncertainty in advanced economies’ monetary and fiscal policies, potentially leading to restrictive financial conditions and increased volatility.

Internally, concerns include crime, migration, inequality, and political polarization, which hinder structural reforms. However, the IMF appreciates economic stability supported by central bank rate cuts and the government’s fiscal plan in the 2025 Budget, aiming for a “notable deficit reduction.”

Fiscally, the IMF stresses the need to adjust spending to close a gap of at least 1% of GDP over the next three years. They emphasize the importance of the Tax Compliance Law, provided additional revenues do not fund new spending initiatives.

To boost Chile‘s growth potential and address social and fiscal pressures, the IMF recommends swift reforms in investment, regulation, and labor markets.

It also suggests unifying fragmented social programs for better efficiency and access for vulnerable sectors. The financial system remains resilient, despite real estate sector vulnerabilities and a less deep financial market.

The Pension Reform could mitigate these challenges by providing more resources to the local market. The IMF advises “rebuilding international reserve buffers” to enhance resilience against external shocks.