Chile Economy Posts Back-to-Back Contractions for First Time Since 2023

Chile’s economic activity contracted for the second straight month in February, delivering a result that stunned analysts and cast doubt on the country’s growth trajectory under its new government.

Chile’s economic activity shrank again in February. The Central Bank reported Tuesday that the Imacec — the monthly index that approximates GDP — fell 0.3% compared with February 2025, far below the +1.6% consensus forecast compiled by Bloomberg. It is the second consecutive contraction after January’s −0.1% reading.

The seasonally adjusted series also declined 0.3% from January, while registering just 0.6% growth on a trailing 12-month basis. The month had the same number of working days as February 2025, eliminating calendar effects as an explanation.

Goods Production in Free Fall

The headline number masks an even worse story beneath it. Goods production plunged 3.7% year-on-year — its steepest decline since March 2023, when the index fell 3.8%. The collapse was driven by two sectors: fruit harvesting and extractive fishing both posted sharp declines, while manufacturing — particularly fish-product processing — deepened its slump.

Industrial production has now contracted for five consecutive months, according to INE data released ahead of the Imacec. Mining was the lone bright spot in the goods category, growing 1% on higher lithium and gold extraction — though even that was partially offset by lower copper output.

Commerce Stalls, Services Hold

Commerce barely grew, posting a 0.2% annual increase. Retail and automotive sales provided modest support — grocery stores, clothing retailers, and online platforms all expanded — but wholesale trade dragged the sector down, with fruit exporters posting particularly weak volumes.

On a seasonally adjusted basis, commerce contracted 2.3% from January, signaling that the headline annual number flatters the underlying trend. Services were the only genuine cushion, growing 1.6% year-on-year, led by healthcare and business services — but even this sector dipped 0.1% in the monthly comparison.

The Worst Start Since 2023

Two consecutive months of contraction have not occurred since April–May 2023, when the Imacec fell 0.5% and 0.6% respectively. The non-mining Imacec — which strips out the volatile copper sector to give a cleaner picture of the broader economy — also contracted 0.3% in February, confirming that weakness is not confined to a single industry.

The miss was not even close. Local economists polled by Pulso expected a range of 0.0% to 1.3% growth. The Central Bank‘s own Economic Expectations Survey had analysts forecasting 1.8%. The actual −0.3% reading fell outside every published forecast range.

What It Means for Kast’s Growth Target

President José Antonio Kast took office on March 11 pledging to push growth toward 4% by the end of his term. His government’s official 2026 GDP growth estimate stands at 2.4% — a target that now looks increasingly ambitious given the first-quarter trajectory.

For that forecast to hold, the economy would need to accelerate sharply from March onward. Analysts at Capital Economics warned before the February data that rising energy prices from the Strait of Hormuz crisis and Kast’s planned fiscal tightening would weigh on growth in coming quarters. Chile imports virtually all of its petroleum, making it more exposed to the oil shock than any other major Latin American economy.

Rate Cut Debate Gets Harder

The Central Bank held its policy rate at 4.75% at its last meeting, caught between weak domestic activity that argues for easing and imported energy inflation that argues for holding. February’s data strengthens the growth case for a cut, but the oil price environment has not improved.

Inflation fell below 3% in January for the first time in five years, but the Hormuz disruption threatens to reverse that progress. Scotiabank noted before the release that the domestic picture supports a 25-basis-point cut, but the Middle East conflict remains the decisive variable for the bank’s next decision.

Chile’s economy grew 2.5% in 2025, but the start of 2026 looks nothing like the second half that generated it. With industrial production in its fifth month of contraction and the Imacec now negative for two straight months, the burden of proof has shifted: the question is no longer whether Chile will hit 2.4%, but whether it can avoid a first-quarter GDP contraction altogether.

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