OECD Economic Outlook, Volume 2026 Issue 1

Chile

Growth is projected to slow from 2.6% in 2025 to 1.7% in 2026, before recovering to 2.5% in 2027. Private consumption and investment will continue to expand, but higher energy costs, tighter global financial conditions and fiscal consolidation will weigh on activity. Inflation will rise temporarily due to higher fuel and transport costs but is projected to ease from 4.2% in 2025 to 3.8% in 2026 and 3.2% in 2027. Risks are tilted to the downside, including a more persistent energy shock, weaker external demand and tighter financial conditions.

Chile should rebuild fiscal buffers while keeping energy-support measures targeted and temporary to preserve incentives and contain costs. Raising growth will require reforms to unlock investment, raise labour market participation and strengthen lifelong learning and reskilling to help workers adapt to AI, automation and the green transition. Effective and timely implementation of the business-permit reform would support investment, including in energy and infrastructure.

Activity weakened at the start of the year, and inflation picked up

Chile’s economy grew by 2.6% in 2025, but activity weakened at the start of 2026. Real GDP rose by only 0.2% over the year to the first quarter, as resilient domestic demand was partly offset by a significant decline in net exports. Inflation picked up sharply in April, with headline consumer prices rising by 4%, up from 2.8% in March. Labour market conditions remain soft, with the unemployment rate reaching 8.9% in March.

Chile

1. Consumer price index excluding energy and food.

Source: Central Bank of Chile; and INE.

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Chile: Demand, output and prices

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Higher international oil prices linked to the evolving conflict in the Middle East have fed quickly into domestic fuel costs. The authorities have largely allowed the increase in international oil prices to pass through to domestic prices, using a fuel stabilisation mechanism (MEPCO) to smooth abrupt fuel-price changes and avoiding large fiscal costs. The policy response has been targeted, including strengthened kerosene support, the freeze of Santiago public transport fares, and a temporary bonus for taxis and school transport. Chile has little direct exposure to the Middle East through trade, but it remains exposed indirectly through the impact of higher global energy prices, and weaker global activity could weigh on export demand. Nevertheless, the terms of trade are projected to improve in 2026 as still-high copper prices outpace higher energy prices.

Fiscal policy is tightening while energy support remains limited

Fiscal policy is assumed to remain restrictive in 2026 and 2027, reflecting a fiscal adjustment package of nearly USD 3.8 billion (around 1% of GDP). The adjustment is expected to come mainly from efficiency gains, reprioritisation and tighter control of current spending. The central government deficit is projected to narrow from 2.8% of GDP in 2025 to 2.1% in 2027, with the new energy-relief measures assumed to have only a small aggregate fiscal effect. The central bank policy rate is assumed to remain at 4.5% through 2026 and early 2027, before being cut to 4.25% in the second quarter of 2027 once inflation nears its target.

Growth will moderate as energy costs and fiscal tightening weigh on demand

GDP growth is projected to slow to 1.7% in 2026 before recovering to 2.5% in 2027. The recovery is expected to be driven mainly by gross fixed investment, supported by mining, energy and related machinery projects. Private consumption will continue to support activity, helped by income growth, but will be restrained by higher fuel prices and softer confidence. Export volumes are expected to recover after a weak first quarter, while imports will continue to rise alongside resilient domestic demand. Inflation is projected to rise in 2026 as higher fuel and transport costs pass through, before easing towards the target in 2027. Downside risks dominate. A more persistent energy shock would further squeeze household purchasing power and raise business costs. Weaker external demand, lower copper demand or tighter global financial conditions would also weigh on growth. Disruptions to sulphuric acid availability could also weigh on growth by constraining mining output and exports, especially if tighter Chinese export restrictions persist. On the upside, faster implementation of permit reform, stronger mining and energy investment, or stronger copper prices could lift activity.

Lifting growth while preserving macroeconomic stability

Supporting investment and productivity are key priorities given slower growth and external headwinds. Lifting economic growth in Chile will require a broad policy package to unlock investment projects, raise labour market participation, and strengthen lifelong learning and reskilling to help workers adapt to shifts driven by AI, automation and the green transition. Effective and timely implementation of the business-permit reform should now be a priority, helping unlock investment, including in energy and infrastructure. Fiscal consolidation remains needed to rebuild buffers, and new reforms should be financed or phased in in a way that does not undermine the necessary fiscal adjustment. Any additional measures to cushion higher energy prices should remain targeted and temporary to limit fiscal costs and preserve incentives.