- ▸ Chile’s structural deficit jumped to 3.6% of GDP (~$13.2 billion) in 2025, the highest outside a crisis and triple the 1.1% target
- ▸ Non-mining tax revenue hit its lowest level since 2014, while public spending grew 3.5% — marking the third consecutive year the government missed its own fiscal rule
- ▸ President-elect Kast’s proposed $6 billion spending cut would halve the structural deficit but risks slowing an economy already growing just 2.3%
Chile’s fiscal numbers are worse than anyone expected. The Public Finance Report for the fourth quarter of 2025, released by the Budget Office (Dipres), confirmed a structural deficit of 3.6 percent of GDP — equivalent to roughly $13.2 billion — the largest since the pandemic and more than triple the 1.1 percent target set in the 2025 budget law. The effective deficit reached 2.8 percent, up sharply from the 2.2 percent projected just one quarter earlier. It is the third consecutive year outgoing President Gabriel Boric‘s government has missed its own fiscal rule. This is part of The Rio Times’ daily coverage of Chile affairs and Latin American financial news.
Analysts say the problem is structural, not cyclical. Non-mining tax revenue fell to its lowest since 2014, excluding the pandemic, driven by lower-than-expected corporate payments, currency appreciation, and a drop in withholding taxes. Meanwhile, government spending grew 3.5 percent in real terms. Econsult analyst Juanita Claro called the report evidence of fiscal irresponsibility — permanent spending consolidated well above structural revenue, financed by drawing down savings.
Kast’s $6 Billion Test
President-elect José Antonio Kast has pledged to cut $6 billion from public spending within 18 months — a figure the market now sees as necessary rather than ambitious. Claro estimates the cut would reduce the structural deficit from 3.6 percent to roughly 1.9 percent of GDP, returning Chile to pre-pandemic levels but still far from balance. Dipres projects the 2026 structural deficit at 2.7 percent, and its medium-term outlook no longer foresees equilibrium by 2030, now projecting a deficit of 1.1 percent that year instead.
The risk is that austerity of this scale — roughly 1.5 percent of GDP — drags an economy already growing just 2.3 percent. Bci economist Antonio Moncado warned the adjustment must be offset by stronger private consumption or investment. Coopeuch’s Nicolás García urged gradualism, arguing the cost of compressing spending too quickly could be significant. One bright spot: gross government debt held steady at 41.7 percent of GDP, below the prudent ceiling of 45 percent, after growing for nearly two decades. But that stability came from favorable exchange rates and nominal GDP growth — not from fixing the underlying imbalance between what Chile earns and what it spends.
Related coverage: Brazil’s Morning Call | USA & Canada Intelligence Brief for Tuesday, February 17, 20