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Growth is projected to remain strong over the next two years. With an uncertain external environment, solid domestic demand will underpin growth, aided by a stable inflation environment, public infrastructure projects and a tax reform. Inequality, though decreasing, remains high as informality and unemployment remain high and social transfers low.
The central bank has started to tighten monetary policy gradually and is projected to continue doing so as stronger wages and reduced labour market slack start putting pressure on prices. The planned gradual fiscal consolidation is appropriate and will stabilise the public debt-to-GDP ratio in the short-term. However, social spending and public investment needs may require higher revenues. Improving skills, integrating the recent flow of migrants, streamlining licencing and regulations, and increasing competition in network services are key for stronger and more inclusive growth.
1. Four-quarter moving average.
2. Data above (below) 50 indicates optimism (pessimism).
Source: OECD Economic Outlook 104 database; and Central Bank of Chile.
Economic Survey of Chile (survey page)