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Overview

Fueled by a strong fiscal response, Chile’s GDP grew at 11.7 percent in 2021, one of the fastest recoveries worldwide. Growth was driven by consumption, amid pension fund withdrawals and direct fiscal support of 9 percent of GDP. One of the fastest vaccination rates globally also contributed to the fast normalization of economic activity.

However, job market recovery has been slower than expected, with only 60 percent of the jobs lost in 2020 regained in 2021 with many previously employed women (most of them low-skilled) still out of the workforce. Inflation accelerated to 7.8 percent y/y in February 2022, driven by strong demand pressures, commodity price increases, supply disruptions, and the peso depreciation. Despite recovering revenues, the fiscal deficit reached 7.7 percent of GDP in 2021 due to high public spending. Notwithstanding the heavy use of public savings funds, public debt reached 37 percent of GDP, the highest in three decades.

Real GDP growth is expected to decelerate to 1.9 percent in 2022 due to the reversal of policy stimulus, while tighter financial conditions and persistent political uncertainty will weigh on investment. Still-high liquidity in households and the enhanced universal pension scheme is expected to provide some cushion to the slowdown in consumption. Further ahead, the removal of direct social transfers, tighter financial conditions, a deteriorated capital market and persistent uncertainty would lead to weak growth through 2024.

Amid the ceasing of emergency transfers and challenging macroeconomic conditions, poverty (US$5.5 a day) is projected to increase to 4.7 percent and the Gini coefficient to 0.46 in 2022. They are not expected to return to the pre-pandemic level in the medium term.

Actual and projected real GDP per capita and poverty rates

Actual and projected real GDP per capita and poverty rates

Last Updated: May 23, 2022

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Chile: Commitments by Fiscal Year (in millions of dollars)*

*Amounts include IBRD and IDA commitments
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Country Office Contacts

CHILE +562 239 82400
Apoquindo 2929, 1300-A, Las Condes, Santiago
USA +1 202 473-1000
1818 H Street NW, Washington, DC 20433