Economic growth is projected to moderate further in 2016, reflecting weak commodity prices, tighter financial conditions and fragile consumer and business confidence. Activity will improve in 2017 as confidence starts to rebound and the global economy strenghtens, underpinning a gradual recovery in investment and private consumption. Once the effects of the past currency depreciation have worn off, inflation will return to within the central bank’s tolerance range.
The central bank raised its main policy interest rate to 3.5% in 2015 to contain inflation. As long as inflation expectations remain well-anchored, monetary policy should remain accommodative to support economic activity, as fiscal policy is becoming less expansionary in response to lower expected medium-term copper prices.
Measures to boost productivity were introduced in the context of 2016 as the “Year of Productivity” in Chile, and a new bill with key measures has been sent to Congress. Actions are intended to improve access to financing, increase exports of services, and simplify regulatory procedures to strengthen entrepreneurship and investment. Implementation of such initiatives can both raise growth and ensure that more Chileans can benefit from higher incomes.
Economic Survey of Chile (survey page)
The Economic Consequences of Brexit: A Taxing Decision (main web page with paper)
Structural reforms in a difficult time (blog + paper)
Public spending efficiency in the OECD (blog + paper)