Chile’s Economy Forecasts for 2024

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Chile has long been regarded as an example of transparency in Latin America, both in the political and financial realms. Over the past decade, Chile has been one of Latin America’s fastest-growing economies. This allowed the country to reduce poverty significantly. The World Bank estimates that COVID-19 could hurt the middle class in Chile, shrinking it by two million people and forcing new middle-class families back into poverty. Even though Chile’s GDP increased in 2022, it was slower than last year. It reached an estimated 2% as tighter financial circumstances, withdrawal of pandemic support measures, and increasing inflation dampened consumer spending. The Chilean economy is expected to fluctuate between expansion and contraction. According to the IMF, the GDP will shrink by 1% in 2023 and grow by 2% in 2024.

2022 the general government balance was -2.6% of GDP after a significant fiscal response to COVID-19. Chile’s budget plan aims to reduce the deficit over the coming years. The general government balance is projected to fall to -2.6% in 2023 and to 1.4% in 2024. In 2022, the government’s gross debt is estimated to be 36.2%. It will likely rise to 36.9% by 2023 and 37.8% by 2024. The government is aiming to stabilize debt in the medium term. IMF projections show that inflation will reach 11.6% by 2022, drop to 8.7% for 2023, and finally, 4.1% for 2024. The Treasury Department announced fiscal austerity, which will result in a decrease in inflation. This is due to the 1.6% expenditure reduction over the next 4 years. Chile’s economy remains susceptible to the impact of international copper prices (especially from China), earthquake and climate risks, insufficient R&D and an unstable road and energy grid. It is also vulnerable to high energy costs and a weak educational system. Copper prices long-term impact Chile’s economy, including employment, wage levels, tax revenue, and national income.

Chile’s high unemployment rate will slightly decrease to 7.9% by 2022. This is mainly due to the recovery in the sectors such as construction, transport, and commerce following the Pandemic. The IMF predicts that the unemployment rate will increase slightly to 8.3% by 2023 and remain at 8.2% until 2024. It has the highest per capita GDP in the area (USD 14,772 – Coface), high inequality levels and informality. The current taxation system, which primarily affects the lower and middle-income classes, is one of the factors that contribute to wealth inequality. Chile has invested a lot in renewable energies, and it is estimated that up to 20 per cent of Chile’s energy production will come from this source by 2025.

The Main Industries

Chile has one of the highest industrialisation rates in Latin America. Its key industries are mining (copper and coal), manufacturing (food, chemicals and wood), and agriculture (fishing and fruits). Chile’s industrial sector contributes 31,7% to the GDP and is responsible for 22,3% of its workforce. Chile’s mining industry is a pillar of its economy. This is due mainly to the large copper reserves, making Chile the world’s leading copper producer, responsible for more than 1/3 of global copper production. Industrial production 2022 decreased primarily due to a decrease in copper output caused by substandard ore, labour problems, and water shortages.

The latest World Bank data shows that the agriculture sector accounts for 3.3% of GDP and employs 9.0% of the population. Agriculture and livestock farming are the primary activities in the central and southern parts of the nation. A deliberate 1990s strategy aimed at the European, North American and Asian markets has resulted in fruit and vegetable exports reaching historic levels. Chile, as one of the largest wine-producing countries in the world, can offer fruits that are out of season to the Northern Hemisphere because of its position in the Southern Hemisphere. The agricultural sector was negatively affected by the unprecedented droughts in 2022 in Chile, especially in critical agricultural areas.

Around 68.8% are employed in the services sector, contributing to 54.6%. Chile’s economy is facing three significant challenges. It must overcome its dependence on copper prices, which account for 50% of its exports, develop a food system that can meet domestic demands, and increase productivity in its mining industry. In recent years, the sector has grown steadily, thanks to information and communication technology development, increased access to education, and greater knowledge and specialist skills amongst the workforce. Tourism, retail, and telecommunications are among the fastest-growing industries in recent years. The pandemic restrictions have had a significant impact on the services sector. However, in 2022, the service sector will grow overall, and the main drivers of this growth are education, healthcare, commerce, hotels, restaurants, and transportation.

Contact the Gateway to South America team to learn about the best investment opportunities in the region. The company is a benchmark for foreign investors wishing to invest in Argentina, Brazil, Chile, Paraguay, Peru and Uruguay, providing expert advice on property acquisition and investment tours.

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