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Economic growth moderated in 2016, reflecting weaker commodity prices and external demand, while consumer and business confidence have been fragile. Growth is projected to edge up in 2017 and 2018 as a somewhat stronger global economy underpins a gradual recovery in investment and private consumption. As the effects of past currency depreciation wear off, inflation will fall into the central bank’s tolerance range.
Monetary policy remains supportive, with the policy interest rate at 3.5%. Recent measures to boost productivity and strengthen investment may help to diversify the economy and support more sustainable growth. However, more needs to be done to address skill mismatches and tackle inequality.
Following a supportive fiscal stance in 2017, medium-term fiscal consolidation is planned to adjust to lower global copper prices, as required by Chile’s fiscal rule. Scope for issuing debt to finance a gradual consolidation exists, and can help to sustain the recovery, in part by supporting ongoing education reforms.
Economic Survey of Chile (survey page)