On 9 March 2021 IMF staff issued a concluding statement following discussions with Chile under

Chile has issued wide policy responses to the pandemic and its macroeconomic policies and institutions remain strong. The economy is recovering from the problems caused by the pandemic although there are still uncertainties going forward. Following an estimated 6% contraction of the economy due to the pandemic the recovery was under way in the fourth quarter and a strong economic rebound is expected for 2021, with estimated growth of 6%. In the medium term, economic growth is projected to return to its potential level of 2.5%.

Risks remain from developments in the pandemic, although these will be mitigated by vaccination. If the demands for de-globalization return, trade may be reduced. Fluctuations in the price of copper could affect exports and growth prospects.

The report indicates that investment can be stimulated if macroeconomic stability is maintained while broad agreement is quickly reached on the necessary structural and social reforms. The report emphasises that the pension reform must be finalised to ensure adequate pension coverage in the future, with increases in contribution rates and ongoing further adjustments to the retirement age and to contributions on the basis of demographics and economic developments.

Tax Revenue

Further tax revenue must be raised, combined with rationalisation of expenditure when the economic recovery has advanced further. The report recommends that direct taxation should be increased by reviewing exemptions, deductions and special regimes, and the tax administration should be strengthened. Indirect taxes should be rationalised gradually, and green taxes should be increased. A Commission of Experts has recently issued recommendations in relation to tax exemptions, deductions and special regimes.

Structural Reforms

Broad structural reforms are also required to deal with labour market mismatches, promote flexibility in the labour market, reduce the size of the informal economy and strengthen competition. Bureaucracy should be streamlined and trade and financial integration continued. Policy actions are also necessary in response to climate change.