The World Bank In Chile

Chile’s sound macroeconomic policies led to a recovery from Covid-induced imbalances, including high deficits and inflation. Fiscal and monetary tightening stabilized the economy but stunted 2023 growth. Chile aims for faster, greener, and more inclusive growth, and reforms targeting productivity, technology, competition, and human capital development are crucial for achieving this objective.

Real GDP rose by 0.2 percent in 2023, as domestic demand adjusted after tighter macroeconomic policies during the post-Covid period. Labor market performance has yet to return to pre-pandemic levels. The unemployment rate remained high at 8.5 percent. Gender gaps in the labor market remain pronounced, with women’s labor force participation at 52.6 percent compared to men’s at 71.4 percent. Inflation has continued its descent, closing 2023 at 3.9 percent y-o-y after a determined monetary tightening and receding supply shocks.

Economic activity is forecast to recover gradually towards trend GDP growth of 2.0 percent in 2024. Amid expected modest economic growth and controlled inflation, poverty (US$6.85/ day, 2017 PPP) is projected to reach 5.0 percent in 2024 and will stay around this value in the medium term. The Gini coefficient is projected to remain at 0.43.

A key challenge for Chile is to move towards higher and more inclusive growth. Growth averaged just 2 percent in the six years preceding the pandemic. Targeted reforms to address specific bottlenecks are needed to boost productivity growth, which has been declining for decades. This includes reducing regulatory barriers, fostering technology adoption, promoting competition, enhancing managerial capabilities, and increasing female labor force participation and job quality. Chile is also expected to leverage the global green transition, with both renewable energy and the plan to expand lithium production through public private partnerships potentially contributing to increased growth going forward.

Last Updated: Apr 12, 2024

The World Bank Group (WBG) has supported Chile’s development for more than 75 years, through a range of instruments including loans, insurance, grants, technical assistance, and knowledge sharing.

Since receiving in 1948 the first World Bank loan made to a country outside of Europe, Chile has continued to engage in a joint learning process to tackle its biggest development challenges. The opening of the World Bank’s first office in Santiago in December 2017 enabled it to continue strengthening its collaboration with the country.

This strategy is based on public policy recommendations for Chile to achieve sustainable and inclusive development and on recommendations to develop a stronger private sector for a more productive and inclusive society.

As of March 2024, the World Bank has an active portfolio that comprises two lending operations for a total of $350 million in support of a green hydrogen financing facility and improving universal primary healthcare.  There is also a REDD+ emissions reduction program for $26 million and a $5m grant for implementation of carbon markets. There are six RAS under implementation with a total value of $8.76 million covering themes such as gender, health, social protection, national statistics and digitizing transport.

The International Finance Corporation (IFC) has actively supported Chile's private sector in enhancing productivity, promoting inclusion, and advancing sustainability. Some of IFC’s most innovative projects are taking place in Chile: this includes E-buses, special products designed to promote financial inclusion; and green hydrogen. In FY23, IFCs achieved a record year in Chile, with new commitments totaling $1.7 billion– an almost 200% increase compared to FY22.

The Multilateral Investment Guarantee Agency (MIGA) is expanding its involvement in Chile by working with State-Owned Enterprises on credit enhancement solutions to attract cross-border investments, in particular, with a focus on promoting the decarbonization of key sectors of the Chilean economy.

In today’s challenging global context, Chile is a strategic partner for reshaping development and moving toward greater sustainability and inclusion.

Last Updated: Apr 12, 2024

Increased environmental sustainability and climate change resilience

Chile received the World Bank’s first-ever global loan to promote green hydrogen and support climate change mitigation efforts. The project seeks to boost investment in green hydrogen projects in Chile to help accelerate green growth and energy transition in the country and support its commitment to carbon neutrality by 2050.

Extensive work has also been done to address water challenges, a key element of development and resilience.

Disaster preparedness

To provide Chile with financial protection to mitigate potential negative economic impacts of earthquakes and the tsunamis that they generate, the World Bank supported Chile's issuance of a US$630 million catastrophe bond and swap, its largest single-country transaction. This will provide Chile with readily available funds in the event of a disaster, enabling the country to protect its fiscal budget and reduce the potential need to mobilize debt after an event.

Universal primary health care coverage and resilience

The Program for Universal Primary Health Care Coverage and Resilience will improve the population’s access to high-quality health services through innovative measures aimed at increasing the accessibility, resilience, and efficiency of primary health care. This program will help solidify primary health care as the bedrock of health care service delivery.

The project will be implemented gradually and aims to reach 187 of the country’s 346 communes by the end of 2027. A number of cross-cutting measures will also be implemented for the benefit of all Chileans.

Strengthening of State Universities

The Strengthening of State Universities project, which ended in June 2023, made significant achievements in terms of improvements in quality and equity, despite the difficult situation caused by the pandemic. Third-year dropout rates for the most vulnerable students fell by almost 10 percent from 36.6 percent in 2018 to 26.8 percent in 2022. The number of research projects awarded to these universities and the number of professors with doctorates also increased.

Increased efficiency in the delivery of social benefits

In coordination with the Ministry of Social and Family Development, the World Bank is providing technical assistance to the Local Social Management (GSL) project. This innovative methodology for the integrated delivery of social services and benefits in municipalities is already available in almost 70 percent of the country’s municipalities. A “one-stop shop” provides officials with access to programs and subsidies available to eligible beneficiaries, paving the way for improved social care delivery and enhanced public spending efficiency.

The program continues to expand to incorporate a module for employment assistance, the support and care network, and as a tool to support the design of local child services offices. It will facilitate the delivery of integrated services to children and their families. A basic module is also being implemented for presidential delegations at the regional and provincial levels.

The knowledge we have gained by working together with Chile has been shared with several countries around the world that face similar development challenges. In recent years, we have received delegations from every region.

Last Updated: Apr 12, 2024