Chile's economy normalizes, faces global uncertainty and productivity questions

From today's perspective, 2025 proved a more favorable year for Chile than initially expected, with macroeconomic indicators evolving positively and several anticipated risks failing to materialize.

Economic growth demonstrated greater resilience and robustness, repeatedly exceeding projections throughout the year.

The non-mining sector is expected to grow close to 3 percent, nearly one percentage point above initial forecasts.

A significant driver was gross fixed capital formation, which expanded by almost 7 percent, substantially surpassing early-year expectations.

This strength was largely concentrated in mining and energy projects, bolstered by higher copper prices and improved global financial conditions.

Private consumption recovered more gradually, but concerns about its weakness dissipated as real wage income improved.

The global economy, particularly US resilience driven by new technologies, also contributed to Chile's improved terms of trade and overall economic performance.

Inflation developments in 2025 were less linear.

Initial rapid declines, driven by lower goods prices and easing external costs, gave way to a slower disinflation pace by Q3, as stronger domestic activity raised persistence risks.

Towards year-end, inflation consistently undershot projections, aided by currency appreciation and a benign external environment.

The Central Bank expects inflation to converge to the 3 percent target in Q1 2026. Services inflation, though persistent, is nearing historical averages.

Monetary policy shifted from restrictive, with gradual normalization of the nominal policy rate.

The current policy rate at 4.5 percent is assessed as mildly contractionary, Naudon noted.

The real neutral rate is estimated between 0.75 percent and 1.75 percent.