The economic context of Chile

Economic Indicators

For the latest updates on the key economic responses from governments to address the economic impact of the COVID-19 pandemic, please consult the IMF's policy tracking platform Policy Responses to COVID-19.

Chile is traditionally considered as a model in Latin America in terms of political and financial transparency. It has also been one of the fastest growing economies in Latin America over the last decade, enabling the country to significantly reduce poverty. However, the World Bank estimates that the impacts of the COVID-19 crisis could reverse years of growth in Chile’s middle-class, reducing its size by nearly two million individuals and pushing new middle-class households back into poverty. Still, even though the country's GDP grew in 2022, growth was slower than the previous year, reaching an estimated 2%, as tighter financial conditions, the withdrawal of pandemic-related support measures, and rising inflation dampened household consumption. In the coming years, the Chilean economy should fluctuate between growth and retraction,with the IMF forecasting a GDP contraction of 1% in 2023 and a growth 2% in 2024.

General government balance closed at -2.6% of GDP in 2022, following a large fiscal response to the COVID-19 pandemic. However, Chile's current budget proposal targets a significant deficit reduction over the next couple of years, with general government balance projected to decrease to -2% in 2023 and -1.4% in 2024. The government's gross debt was estimated at 36.2% of GDP in 2022 and is likely to rise to 36.9% in 2023 and 37.8% in 2024. However, the government aims to stabilise debt over the medium term. According to IMF estimates, inflation reached 11.6% in 2022 and is expected to decrease to 8.7% in 2023 and 4.1% in 2024. Inflation should improve through fiscal austerity measures announced by the Treasury Department, particularly due to 1.6% of GDP in spending cuts over the next four years.  Despite recent efforts to diversify its economy, Chile remains vulnerable to international copper prices, international demand (particularly from China), climate and earthquake risks, inadequate R&D, vulnerable road network and energy grid, high energy prices and a poor educational system (Coface). The long-term outlook for copper prices, therefore, has far-reaching ripple effects for employment, wages, government revenue, and national income in Chile, so the major issue to be tackled by the government in order to revive economic growth is to reinforce commercial cooperation with new trade partners, particularly in Asia.

Chile's relatively high unemployment rate slightly decreased to 7.9% in 2022, influenced mainly by the construction, commerce, and transport sectors, which bounced back after the pandemic. However, the IMF expects the unemployment rate to slightly increase to 8.3% in 2023 and remain stable at 8.2% in 2024. The country has the highest GDP per capita in the region (USD 14,772; Coface), but also high levels of inequality and informality (OECD). Factors in wealth disparity include the current tax system that handicaps mostly lower and middle-income classes. Chile has notably invested heavily in renewable energy, which is expected to account for up to 20% of its energy generation by 2025.

Main Sectors of Industry

Chile is among the most industrialised countries in Latin American and some of its key industries include mining (copper, coal and nitrate), manufactured products (food processing, chemicals, wood) and agriculture (fishing, viticulture and fruit). The industrial sector in Chile contributes 31.7% of GDP and employs 22.3% of the working population. The mining sector is one of the pillars of the Chilean economy, mainly due to large amounts of copper reserves, which make Chile the world's largest copper producer, responsible for over 1/3 of the global copper output. In 2022, industrial production decreased, mainly led by a drop in copper output due to substandard ore grades, labour woes, and water scarcity.

According to the latest data from the World Bank, the agricultural sector contributes 3.3% of GDP and employs 9% of the active population. Agriculture and livestock farming are the main activities in central and southern parts of the country. Fruit and vegetable exports have reached historic records due to a deliberate strategy implemented in the 1990s targeting the European, North American and Asian markets. Chile is one of the biggest wine producers in the world and its location in the Southern Hemisphere allows the country to offer out-of-season fruits to countries of the Northern Hemisphere. In 2022, however, unprecedented draughts in the country, specially in key agricultural areas, negatively impacted the agricultural sector.

The services sector contributes 54.6% of GDP and employs around 68.8% of the population. The Chilean economy faces three main challenges: overcoming its traditional dependence on the price of copper, as copper production represents 50% of the country's exports; developing a self-sufficient food supply, as agriculture currently produces less than half of domestic needs; and increasing its productivity, especially in the mining sector. The sector has been consistently growing in recent decades, reinforced by the rapid development of communication and information technology, access to education and an increase in specialist skills and knowledge among the workforce. Among the highest growing sectors in recent years are tourism, retail and telecommunications. Although the restrictions put in place during the pandemic have had a strong impact on services, the sector registered an overall growth in 2022, with the recovery being mainly driven by education, health, commerce, restaurants, hotels, and transport.

 

Breakdown of Economic Activity By Sector	Agriculture	Industry	Services
Employment By Sector (in % of Total Employment)	6.6	23.0	70.4
Value Added (in % of GDP)	3.5	32.0	54.3
Value Added (Annual % Change)	0.1	-1.7	5.2

Source: World Bank, Latest Available Data. Because of rounding, the sum of the percentages may be smaller/greater than 100%.

 

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Indicator of Economic Freedom

Definition

Definition:

The Economic freedom index measure ten components of economic freedom, grouped into four broad categories or pillars of economic freedom: Rule of Law (property rights, freedom from corruption); Limited Government (fiscal freedom, government spending); Regulatory Efficiency (business freedom, labour freedom, monetary freedom); and Open Markets (trade freedom, investment freedom, financial freedom). Each of the freedoms within these four broad categories is individually scored on a scale of 0 to 100. A country’s overall economic freedom score is a simple average of its scores on the 10 individual freedoms.}}

Score:

75,2/100

World Rank:

19

Regional Rank:

2

 

Business environment ranking

Definition

Definition:

The business rankings model measures the quality or attractiveness of the business environment in the 82 countries covered by The Economist Intelligence Unit’s Country Forecast reports. It examines ten separate criteria or categories, covering the political environment, the macroeconomic environment, market opportunities, policy towards free enterprise and competition, policy towards foreign investment, foreign trade and exchange controls, taxes, financing, the labour market and infrastructure.

Score:

7.65/10

World Rank:

19/82

Source: The Economist Intelligence Unit - Business Environment Rankings 2020-2024

 

Sources of General Economic Information

Ministries

Official Government website - list of ministries and public institutions (in Spanish)
Ministry of the Economy, Development and Tourism (in Spanish)
Ministry of Finance (in Spanish)
Ministry of Foreign Affairs (in Spanish)
Ministry of Public Works (in English)

Statistical Office

National Institute of Statistics (in Spanish)

Central Bank

Central Bank of Chile

Stock Exchange

Santiago Stock Exchange

Economic Portals

Economic information portal of the Chilean Ministry of the Economy
Economy watch
Business News Americas
Focus Economics Chile