Slower Chile growth will bring electoral challenges

Subject

Chile's economic outlook.

Significance

On July 23, in an update of its World Economic Outlook, the IMF slashed its forecast for economic growth this year in Latin America and the Caribbean from 1.4% to 0.6%, due principally to a sharp cut for Brazil. By contrast, the reduction for Chile, from 3.4% to 3.2%, was small but may err on the side of optimism.

Impacts

• Dependence on copper remains a key challenge for Chile as regards both GDP growth and fiscal revenues.
• Slower growth particularly worries the new lower-middle class, eager for further gains in living standards.
• In the foreseeable future, Chile’s economic performance will likely be constrained by external conditions.