IMF Commends Chile’s Economic Resilience Despite Rising Inflation Risks

Washington, D.C. — The International Monetary Fund (IMF) has praised Chile’s resilient economy and strong policy framework despite growing global uncertainties, while urging the South American nation to remain vigilant against inflationary pressures, strengthen fiscal discipline and accelerate structural reforms to sustain long-term growth.

In its latest 2026 Article IV Consultation, concluded on Monday, the IMF Executive Board said Chile’s economy continues to demonstrate remarkable resilience, supported by robust domestic demand and higher global copper prices. However, it warned that elevated oil prices resulting from the ongoing conflict in the Middle East have pushed inflation above the central bank’s target and could weigh on economic activity if they persist.

The IMF noted that Chile’s Gross Domestic Product (GDP) expanded by 2.5 percent in 2025, driven largely by strong non-mining domestic demand. Although inflation returned to the central bank’s target earlier this year, it has since accelerated due to rising energy costs linked to geopolitical tensions in the Middle East.

Despite persistent fiscal deficits caused by lower-than-expected government revenues, the Fund said Chile’s public debt remains at a moderate level, while its financial sector continues to exhibit resilience. Nonetheless, vulnerabilities remain in the construction and real estate sectors, which require close monitoring.

Looking ahead, the IMF forecasts that Chile’s economic growth will moderate to 1.8 percent in 2026 before rebounding to 2.6 percent in 2027, buoyed by stronger copper prices and continued implementation of growth-enhancing reforms.

Inflation is expected to remain above the central bank’s target through the remainder of 2026 and into early 2027 before gradually easing back to desired levels.

The Fund cautioned that global economic uncertainty continues to cloud Chile’s outlook, with the possibility of prolonged high oil prices posing significant risks to both growth and price stability.

“The outlook remains subject to elevated uncertainty, with near-term risks tilted to the downside,” the IMF said.

It advised Chile’s central bank to remain prepared to tighten monetary policy if rising energy costs trigger broader inflationary pressures across the economy.

At the same time, the IMF encouraged authorities to continue rebuilding international reserves through the central bank’s reserve accumulation programme, describing it as an important safeguard against external shocks.

Fiscal policy also featured prominently in the Fund’s assessment.

While welcoming the Chilean government’s commitment to reducing the structural fiscal deficit and restoring fiscal sustainability, the IMF warned that further measures will be required to meet its medium-term objectives.

The government has pledged to reduce the structural fiscal deficit to 1.5 percent of GDP by 2030 while keeping public debt below 45 percent of GDP.

According to the IMF, achieving those targets will require additional fiscal consolidation beyond measures already announced, particularly as public spending pressures continue to mount.

Executive Directors welcomed plans to improve expenditure efficiency and rationalize government spending, while emphasizing that reforms under the government’s National Reconstruction Plan should be carefully prioritized to avoid undermining fiscal sustainability.

They also suggested improving the targeting of minimum guaranteed pensions and consolidating fragmented social programmes to better protect vulnerable populations while making public spending more effective.

The IMF further commended Chile’s well-established monetary policy framework, describing the country’s inflation-targeting regime as robust and credible.

Directors expressed support for the central bank’s readiness to respond to inflationary risks and welcomed ongoing efforts to strengthen international reserves, noting that these measures complement Chile’s Flexible Credit Line arrangement with the IMF.

On financial stability, the Executive Board concluded that Chile’s banking and financial systems remain sound and well supervised.

However, it urged authorities to continue implementing recommendations made under the 2021 Financial Sector Assessment Program (FSAP), while maintaining close oversight of risks in the construction and real estate industries.

The IMF also welcomed progress in strengthening Chile’s anti-money laundering and counter-terrorism financing framework and encouraged the gradual implementation of the country’s recent pension reforms to minimize disruptions in financial markets.

Beyond short-term macroeconomic management, the Fund stressed that structural reforms will be essential to raising Chile’s long-term growth potential.

Executive Directors endorsed the government’s objective of fostering stronger medium-term growth through deregulation and encouraged complementary reforms aimed at narrowing labour market skills shortages, reducing gender gaps in employment and improving the country’s minimum wage-setting process.

Additional reforms to facilitate trade, encourage innovation and diversify the economy would further enhance productivity and attract investment, the IMF said.

Despite the challenges posed by volatile global commodity markets and geopolitical tensions, the IMF’s overall assessment paints a positive picture of Chile’s economic fundamentals.

The Fund credited the country’s strong institutions, prudent macroeconomic policies and commitment to fiscal responsibility with enabling it to weather external shocks better than many emerging economies.

Nevertheless, it stressed that rebuilding fiscal and external buffers, maintaining credible economic policies and advancing structural reforms will be critical to preserving Chile’s resilience and sustaining inclusive economic growth in the years ahead.

The IMF concluded that while higher copper prices offer an important opportunity to strengthen the country’s economic outlook, policymakers must continue balancing growth objectives with inflation control and fiscal discipline to ensure long-term economic stability.