Chile: 2024 Article IV Consultation-Press Release; and Staff Report

The 2024 Article IV Consultation with Chile discusses that the economy is broadly balanced but external risks are elevated. Chile’s macroeconomic position is sound due to its very strong fundamentals, policies, and policy frameworks. Lifting Chile’s growth potential is a must to raise living standards and tackle social and fiscal pressures. The goal of a broadly balanced fiscal position by 2027 remains appropriate but has become more challenging. Continuous enhancements to Chile’s already very strong fiscal framework would foster fiscal policy formulation and transparency. A pension reform is essential to ensure adequate pensions and address the fiscal costs of population aging. Raising contribution rates and the number of contribution periods is vital for sustainably self-financing old-age pensions. The minimum guaranteed pension has strengthened the system’s solidarity, increased replacement ratios, and reduced old-age poverty, but it also incurs high fiscal costs. The financial system remains resilient despite rising vulnerabilities related to the real estate sector and lower financial market depth.