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Chile Economic activity will drop by 0.1% in 2023 and increase by 1.9% in 2024. Tighter financial conditions and the withdrawal of pandemic-related support will reduce household consumption during the first half of this year. Higher interest rates and uncertainty will also hit investment during 2023. As the effects of the monetary policy tightening are passed to activity, inflation will continue to abate throughout 2023, and return to target in late 2024. Monetary policy will remain tight, but the budget balance will move back into deficit. Higher investment in social programmes and infrastructure to meet social demands and boost productivity requires a more progressive tax system that allows for additional revenue. Increasing productivity will also require reducing barriers to competition and ensuring proper funding of the competition authority, as well as focusing research and development support on the most effective programmes. Activity continues to decelerate GDP grew by 0.8% in the first quarter of 2023, but economic activity decreased in March and April, as measured by the monthly indicator of economic activity (IMACEC), and weak retail and car sales suggest an ongoing downward adjustment in consumption levels after the withdrawal of support measures to face the pandemic. Despite subdued demand, inflation has been persistent, with headline and core decreasing slightly but remaining around 10%. However, one-year-ahead inflation expectations are decreasing, and two-year inflation expectations remain anchored within the central bank’s tolerance band. Real wages started to recover in the first months of 2023.
Chile
1. The shaded area represents the central bank's inflation target range. 2. Consumer price index excluding energy and food products. Source: Central Bank of Chile; and INE. StatLink 2 https://stat.link/iu81ge
OECD ECONOMIC OUTLOOK, VOLUME 2023 ISSUE 1: PRELIMINARY VERSION © OECD 2023