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The Economy of Chile in 2023 - Industry & Market Trends

Last Updated: October 30, 2023
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Population

18.952 million

GDP

300.73 billion

GDP Growth Rate

2.4 %

GDP Per Capita

15166 USD

Land Size

743532 km²

TFR

1.6 Child

Unemployment Rate

7.9 %

Inflation Rate

11.6 %

What is The Overall Outlook in Chile ?

Chile is a relatively small country situated along the western seaboard of South America. While it only accounts for about 3% of the population in the Latin America & Caribbean region, it however contributes a much larger share of the economy at 5.8%. The GDP per capita is also quite high, which is around 16 thousands or  second highest in the non-Caribbean Latin American economies

It has a well-educated workforce and an attractive quality of life that draws in migrants. Its success in non-traditional productive sectors such as agro-industry, fisheries, and high technology will continue to contribute to the country’s growth. Despite this, Chile’s economy remains dependent on commodity exports, with copper and lithium being its primary exports. The country’s success in diversifying its economy is significant, but it remains vulnerable to fluctuations in international demand and prices.

Chile’s demographic outlook is unfavorable, with a low birth rate and an aging population profile leading to a shrinking working-age population. Even with immigration, the old-age dependency ratio is set to increase, leading to slower long-term growth prospects. However, the green energy transition will be a significant growth driver, given Chile’s status as the world’s largest copper producer and the second-largest producer of lithium, with the world’s largest reserves of both minerals.

Chile’s large network of FTAs and investment treaties, as well as its tourism promotion campaigns, will continue to boost its non-traditional export industries and service exports. With its open and liquid capital markets, Chile is the most developed financial center in the region, with ample cross-border opportunities in banking, insurance, and securities markets arising from deeper regional integration.

Chile’s long-standing pro-market policy direction is weakening as political polarization impedes consensus-building, and there is a growing demand for greater state provision of social services and efforts to reduce income inequality and tackle climate change. This trend will lead to increased taxation and greater regulation over resources, especially water, and give more decision-making power to local communities, particularly indigenous groups.

Despite the challenges, Chile’s long term outlook is relatively positive, supported by its matured relationship with many trading partners, abundance of natural resources, and its relatively well-educated workforce among the South American nations. Chile’s supportive business environment will allow investment to drive high growth in capital stock, which will be the most important contributor to growth over the next five years. Chilean firms are some of the most competitive in the region, with significant outward FDI flows, and this is likely to continue in the long term, supporting deeper integration of Chile’s economy into regional and global supply chains.

However, with growth in the working-age population slowing, economic expansion will become more dependent on productivity gains and less on the contribution of labor. Educational reform aimed at improving the quality of the education system and augmenting the availability of skilled labor will increase Chile’s growth potential, but it will be difficult to achieve. According to IMF projection, it is likely that Chile will maintain a GDP growth rate of 2.2-2.5% over this decade.

Chile - Real GDP Growth
Note: Real GDP Growth (%) | Forecast After 2023 (IMF)
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Economic Structure

The latest GDP update was in October 2023, updating the data on the contribution of GDP output in various sectors for the year 2022, as a proportion of the total GDP. The data is sourced from the World Bank, IMF, and local government statistics. Predictions on the sources of GDP contribution are from the EIU.

Private Consumption
63.9%
Gov Expenditure
14.4%
Capital Formation
24.8%
Export
35.7%
Import
39.3%
Economic Growth(By Type)
Note: Real GDP Growth (%) | Forecast After 2023 (EIU)

Overall Economic Outlook in Chile?

Chile’s real GDP is expected to contract by 1% in 2023, according to projection by the IMF. This is largely due to economic normalization after a 2.4% expansion in 2022, driving by the huge fiscal stimulus and pension withdrawals. High inflation, interest rates, slow labor market recovery, policy uncertainty, and pessimistic business sentiment are also contributing factors. However, a sequential recovery is expected from the second quarter of 2023, with decreasing inflation, growing government spending, reduced policy uncertainty, and increased demand for Chilean exports as China eases COVID-19 restrictions.

The Chilean government has introduced a “Let’s Invest in Chile” plan to stimulate private investment in 2023 through tax incentives, easier financing conditions, and greater efficiency in the processing of permits. The risks going forward include global growth slowdown, a radical constitutional reform process, and worsening drought conditions that may affect mining and agricultural production. The upside risks to the economic outlook include stronger-than-expected global demand and a well-run constitutional reform process that boosts the investment outlook. The economy is expected to see full-year growth in 2024, assuming policy uncertainty abates after the end of the constitutional reform process, global conditions become more favorable, and inflation eases further.

Population

18.952 million

Land Size

743532 km²

GDP

300.73 billion

GDP Per Capita

15166 USD

Unemployment

7.9 %

Inflation

11.6 %

Urbanization

87.6 %

TFR

1.6 Child

GDP Per Capita
Note: Real Growth (%) | Forecast After 2023 (IMF)
GDP Per Capita (PPP)
Note: Real Growth (%) | Forecast After 2023 (IMF)
Unemployment Rate
Note: %
Inflation Rate
Note: %

Other Economies

Industry Structure

The latest GDP update was in October 2023, updating the data on the contribution of GDP output in various sectors for the year 2022, as a proportion of the total GDP. The data is sourced from the World Bank, IMF, and local government statistics. Predictions on the sources of GDP contribution are from the EIU.

Agriculture
4.1%
Industry
28.7%
Manufacturing
10.1%
Service
67.9%
Economic Growth(By Sector)
Note: Real GDP Growth (%) | Forecast After 2023 (EIU)

Demographics Overview

Population +

23 k people

Birth

231 k people

Death

141 k people

Net Migration

-67 k people

Chile - Population Growth Drivers
Note: % | forecast after 2023
Chile - Age Structure - Historical & Forecast
Note: % | forecast after 2023

Natural Growth

4.6 ‰

Net Migration

-3.4 ‰

Young Dependency

27.8 %

Old Dependency

18.6 %

Chile - Median Age
Note: Age
Chile - Demographic Structure
Source: UN Population; OOSGA Analytics

Political Overveiw

Chile’s political history saw 20 years of center-left rule, followed by a center-right coalition’s win in the 2010 presidential election. The center-right and center-left alternated in power until the 2021 election, which saw Gabriel Boric of the left-wing Apruebo Dignidad coalition win. He took office in March 2022. Chile has a presidential system with a bicameral legislature and 15 regions, 54 provinces, and 346 municipalities.

Chilean economic policy has prioritized free trade, a liberal investment regime, and market competition with minimal red tape and restrictions to entry. The country’s fiscal and monetary policymaking has been prudent, supported by strong institutions such as the central bank, which directs monetary policy based on an inflation-targeting regime. The current administration under Boric intends to increase the state’s role in the economy by expanding public provision of social services, creating state-owned firms, renegotiating free-trade agreements, and increasing environmental, labor, and social regulations.

Chile’s business environment is likely to be weakened by tax and pension reforms and the constitutional reform process in 2023, which will shape the economic policy landscape over the coming decade. It is unlikely to hurt the business environment of Chile though, especially when it is a global trend. However, policy uncertainty is expected to rise in 2023 until the document is finalized. The government’s reform agenda in 2023 focuses on tax reform, which aims to generate more funds for social spending and make the tax code more progressive. However, negotiations with business organizations resulted in 27 amendments to the bill, with the tax reform likely to be diluted further after negotiations with an evenly divided Congress.

The proposed pension reform is another flagship item that the government has submitted to Congress. The reform aims to replace private pension administrators with a new public agency, which would compete with a state-run alternative. The reform’s statist elements are expected to be diluted or abandoned altogether due to opposition from right-wing parties and the public regarding the redistributive elements of the contributory pension system. However, the proposal to expand the non-contributory basic pension is popular and likely to pass. These reforms will weaken Chile’s business environment, including higher taxes and stricter environmental, labor, and social regulations, which will increase the cost of doing business.

Chile - Government Spending (% of GDP)
Note: (%)|2023後為預測(IMF)

Current Account Balance

-27.1 Billion

Current Account Balance (% of GDP)

-9 %

Gov Net Landing/Borrowing(% of GDP)

1.4 %

Gov Gross Debt(% of GDP)

38 %

Chile - Current Account Balance
note: (% of GDP) | Forecast After 2023
Chile - Gross Debt
note: (% of GDP) | Forecast After 2023

Consumer Brief

We have consolidated data on Chile’s e-commerce, social media, and insights relate to how customers in Chile make decisions and spend.

Social Media Development, User Demographics, Platforms, and Trends in Chile

Social Media Development, User Demographics, Platforms, and Trends in Chile

Reference
  • Economic Data:OECD, World Bank, IMF、Government Statistics Bureau
  • Currency Exchange:Based on IMF data in 2023/1
  • GDP Growth Projection:OECD、IMF, OECD, EIU、Government Bureau
  • Demographics:UN Population Database
  • Race, Culture, and Languages:CIA Factbook
  • Unemployment Rate Projection:ILO, UNECE
  • Trade:UN Comtrade, UNCTD
  • ICT Infrastructure:ITU
  • Data Calculation & Regression:OOSGA.org
  • Analysis:OOSGA Analytics
  •  
Author: Economic Team, CR Team

We track the latest economic developments from spending, retail, real estate to demographics in major economics around the world.

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