Chilean economy “is propped up” despite “downside risks”, concludes IMF

The International Monetary Fund (IMF) concluded this Friday that although “downside risks persist, Chile’s resilience is underpinned by extremely solid economic and political fundamentals.”

After the Article IV Consultation with Chile, the international organization stated in a statement that the Chilean economy is undergoing “a necessary transition towards sustainable growth in the midst of a complicated external situation”, after the notable recovery after the Covid-19 pandemic. 19, and highlighted “the low level of public debt” of the country, a “sustainable” external position and the policies and institutional frameworks “extremely solid”.

The international organization pointed out that the economic activity of Chile “it is moderating rapidly”, while inflation, “seems to have peaked in august”, when it reached 14.1%, the highest level in thirty years.

According to IMF projections, year-on-year GDP growth will continue to “slow down in the last quarter of 2022” and will recover in the last quarter of 2023.

“Given the monetary contraction and the negative output gap, inflation is projected to converge towards the target by the end of 2024″, the entity maintained.

The executive directors of the organizationpraised the decisive tightening of monetary policy” by the Central Bank, which they described as “consistent” with the inflation targeting scheme, after the issuing entity raised the referential interest rate progressively in 2021 until it reached 11.25% in October, its highest level since 2001.

Senior officials applauded “the solid fiscal position in 2022, which exceeded expectations” and noted that the 2023 budget’s focus on increased social spending and public investment “is appropriate in the context of a negative output gap,” the statement added. .

They also pointed out that “new pension withdrawals should be avoided”, and that should be “carefully formulate and manage” the pension reform.

As established in Article IV of the IMF Articles of Agreement, the organization holds bilateral talks with its member countries regularly every year.

A team of IMF officials visited Chile, gathered economic and financial information, and discussed with the authorities the evolution of the country and its economic policies. After returning to IMF headquarters, the officials prepared a report that served as the basis for the Executive Board’s analysis.

Source: EFE