Policy support overcompensated income losses
Inflation has risen
Regulations are complex
Tax revenues are low
Renewable energies have potential
Income convergence has reversed
Potential growth is set to decline as the population ages rapidly
Ambitious structural reforms are estimated to lift incomes significantly
Covid-19 triggered a strong vaccination campaign and exceptional fiscal support
Pandemic-related policy measures have far overcompensated household income losses
Consumption and growth are slowing down amid low confidence
The labour market is recovering gradually
The current account deficit has widened amid deteriorating terms of trade
External debt is substantial and foreign exchange reserves provide some buffer
Financial stability indicators
Chile’s traditionally deep credit markets have become shallower and riskier
Monetary policy has reacted early, but inflation expectations remain high
Rising public expenditures led to a substantial widening of the fiscal deficit
Emergency transfers rose strongly during 2021
The debt outlook has deteriorated, but is still better than in other EMEs
Public debt has risen
Tax revenues are low (graph)
Tax revenue composition
Only few people pay personal income taxes
Productivity has been a drag on growth and has fallen behind regional peers
Vibrant entry of new firms has been sustaining productivity growth
Competition is relatively weak
Product market regulations compare well on average, but challenges remain
Municipal licenses are a significant burden on entrepreneurship
Regulation restricts competition in the notaries profession
Chile’s trade participation is mid-range, but it attracts sizeable FDI flows
Mining continues to play a significant role for Chile’s exports
Regulations affecting international trade and investment could be improved
R&D and innovation spending and support remain low
Learning outcomes remain relatively low and dependent on socio-economic status
Corruption indicators
Energy and transport are the major source of GHG emissions
Fossil fuels still represent an important share of the energy matrix
Green tax revenues come from the most polluting industries
Poverty and inequality have increased during the first year of the COVID-19 pandemic
The loss of jobs and incomes led to an unequal social impact during the pandemic
Informality is larger among low-income and self-employed workers
Informality rates vary strongly with socioeconomic characteristics
Informality and unemployment are concentrated among the vulnerable
Rotation in the labour market is high limiting access to social security
Informal workers suffered the most from the COVID-19 crisis
Women and youth suffered more during the COVID-19 pandemic
Public social spending is low
Coverage of the social protection system remains low
Cash transfers programmes leave many poor households without any support
Emergency cash transfers mitigated the COVID-19 impact on poverty and inequality
Emergency cash transfers mitigated income losses during the worst of the pandemic
Pension funds withdrawals overcompensated for income losses during the pandemic
Coverage of the unemployment insurance system has increased but remains limited
Replacement rates in unemployment remain limited
Protection against job losses has improved but significant gaps remain
Minimum wages are high relative to median wages
The Chilean pension system delivers low replacement rates
Effective contribution years are low leading to low self-financed pensions
The new minimum pension has led to higher replacement rates
Public expenditure on pensions is relatively low
Health coverage is high but there are disparities in the quality of services
Waiting lines are longer in the public health system
Household out-of-pocket spending is amongst the highest in OECD countries
Estimated impact on poverty and inequality of proposed social protection programmes