Chile: Review Under the Flexible Credit Line Arrangement-Press Release; Staff Report; and Statement by the Executive Director for Chile

International Monetary Fund. Western Hemisphere Dept.

doi:10.5089/9781513572987.002.A001

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International Monetary Fund. Western Hemisphere Dept.

International Monetary Fund. Western Hemisphere Dept.
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Publication Date:: 21 May 2021

eISBN:: 9781513572987

ISBN:: 9781513572987

Language:: English

Keywords:: headline inflation; central bank of Chile; rising prices; Mexican peso; foreign currency; COVID-19; Global; debt ratio

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1. Chile maintains very strong economic fundamentals and institutional policy frameworks, with a sustained track record of policy implementation, even during the pandemic. Monetary policy has remained anchored in an inflation-targeting framework with a longstanding free-floating exchange rate regime. This has kept inflation low and stable, and has anchored inflation expectations. Fiscal policy has been guided by the cyclically-adjusted fiscal balance rule since 2001. This contributed to asset accumulation in the SWF and to low debt by international standards. Chile has consistently shown one of the highest levels of policy credibility and quality of the regulatory framework among emerging economies. All of this has allowed Chile’s economy to remain resilient to shocks, including the 2019 social unrest and the still unfolding pandemic.

Abstract

Context

1. Chile maintains very strong economic fundamentals and institutional policy frameworks, with a sustained track record of policy implementation, even during the pandemic. Monetary policy has remained anchored in an inflation-targeting framework with a longstanding free-floating exchange rate regime. This has kept inflation low and stable, and has anchored inflation expectations. Fiscal policy has been guided by the cyclically-adjusted fiscal balance rule since 2001. This contributed to asset accumulation in the SWF and to low debt by international standards. Chile has consistently shown one of the highest levels of policy credibility and quality of the regulatory framework among emerging economies. All of this has allowed Chile’s economy to remain resilient to shocks, including the 2019 social unrest and the still unfolding pandemic.

2. The FCL arrangement is serving the country well, and providing an important buffer against tail risks. The FCL was designed to provide a credit line with large and upfront financing to members with very strong fundamentals and institutional policy frameworks, sustained track records of implementing very strong policies, and a commitment to maintaining such policies in the future. As access to the FCL arrangement is available only to members that meet strict qualification criteria, drawings under such an arrangement are not tied to ex-post conditionality. ^¹ Chile’s open economy was exposed to substantial external risks as a result of the ongoing COVID-19 outbreak. While the authorities have continued to retain market access at low borrowing costs and to treat access under the FCL arrangement as precautionary, the FCL arrangement (granted to Chile in light of its very strong fundamentals and policy settings) provides a substantial buffer which can readily supplement its foreign reserves in case of tail risk. In addition, together with the authorities’ significant policy efforts and credibility in the face of the COVID-19 pandemic, access to FCL resources has been supporting market confidence.

3. The mid-term review is taking place against a back-drop of a continuing pandemic, an improved global outlook, and a world-leading vaccination effort. The pandemic hit Chile while it was recovering from the impact of social unrest in October 2019. The COVID-19 outbreak induced a large decline in growth, prompting the authorities’ commendable policy response (see IMF Country Report No. 21/83). Most recent data point to an ongoing recovery, with the support of an improved global growth outlook and a surge in copper prices. Chile’s world-leading vaccination effort began in December 2020 and about 8 million having received their first dose as of end-April, with plans to vaccinate most of the adult population (about 15 million people) during 2021H1. As of end-April, Chile confirmed 1.2 million cases of COVID-19 and 26,000 deaths, in a population over 19 million. In response to the increasing number of new cases of COVID-19 in March 2021, the government tightened mobility restrictions but expanded existing fiscal measures to mitigate their impact.

Recent Developments

4. Following a sharp growth decline in 2020, economic activity has been recovering. Economic activity declined by 5.8 percent in 2020. Supported by ample policy stimulus, the economy gradually recovered in 2020H2, while copper production remained mostly steady despite the pandemic. Monthly economic activity in both January and February 2021 was only 2 percent below the levels prevailing a year before.

5. The authorities’ wide-ranging set of fiscal, monetary, and financial policy responses to the pandemic have been swift and effective. The government’s multi-year fiscal package has helped to safeguard health, protect incomes and jobs, support credit, and buttress the recovery. Meanwhile, the Central Bank of Chile undertook monetary stimulus and unconventional measures which have supported liquidity, while financial sector policies have been adjusted to facilitate the flow of credit, especially to households and SMEs. International reserves were about US$3 billion higher at end-2020 than at the time of the FCL approval, and in January 2021 the BCCh also initiated a program to gradually increase FX reserves by US$12 billion over 15 months.

6. The exchange rate has continued its strong adjustment role. The exchange rate adjusted substantially in 2020, acting as a shock absorber. Relative to its average value in the first three quarters of 2019, the NEER depreciated by over 7 percent in 2019Q4, and by an additional 7 percent until end-April 2020. It then strengthened, resulting in an overall appreciation of 2 percent during 2020, supported also by the increase in copper prices. The REER (CPI-based) appreciated by 3.5 percent in 2020 (yoy December), reversing some of the 10 percent drop in 2019. The exchange rate appreciation continued until April 2021, with copper prices above historical averages. The Central Bank let the exchange rate adjust without intervention in 2020 despite the increase in market volatility, allowing it to respond to changes in economic fundamentals and play its role of shock absorber.

7. Headline inflation is hovering around the policy target, while core inflation remains subdued and inflation expectations remain well anchored. After peaking at close to 4 percent in early-2020, as a result of the pass-through from the exchange rate depreciation onto domestic prices, the headline inflation rate moderated in mid-2020 amid the decline in economic activity. During the second half of the year, rising prices of food and beverages pushed headline-inflation close to the BCCh’s policy target of 3 percent. However, core inflation remained subdued at 2.6 percent in February 2021— below target. Two-year ahead inflation expectations remain well anchored.

8. The financial sector appears to be sound despite lower profitability. As reported in October 2020, banks have capital above the regulatory minimum (capital adequacy ratio is 14.3 percent) and exhibit low non-performing loan ratios (1.6 percent of total loans) in February 2021. However, due to higher provisions, return on equity dropped below 8 percent (from 16.2 percent in 2019Q4). Credit growth slowed down in 2020 despite the government support via FOGAPE guarantees. Despite some heterogeneity across borrowers, the leverage of non-financial corporations and households, measured by credit-to-GDP ratios, is in line with the one observed in countries of a similar level of development. The credit to non-financial corporates relative to GDP is high compared to regional peers, but is largely FDI-related (which reduces roll-over risk) and hedged against exchange rate risk. House prices and rental investment properties should continue being monitored, but long-term maturity, low and fixed interest rates, and limited leverage mitigate risks from the housing market.

9. Chile’s strong financial market resilience was confirmed during the ongoing COVID-19 turbulence, as in previous episodes. In line with the general trend for EMs, non- resident portfolio outflows exceeded those from past episodes but have recovered since (see text chart). Compared to LA5 and other EMs, Chile recently experienced a smaller increase in spreads and yields on domestic sovereign bonds (Figure 2). Consistent with its role as a shock absorber, the exchange rate depreciation was substantial, but not among the highest. This performance is similar to what Chile experienced versus other LA countries in other episodes of financial turmoil over the past decade (see Figure 3).

Outlook and Policies

10. Economic activity is expected to rebound in 2021, on the back of ample policy support and an impressive vaccination program. Economic activity is expected to grow at 6.5 percent in 2021, as the vaccination process proceeds fast while the economy continues to get support from accommodative policies, so that mobility restrictions are expected to be relaxed and the fallout from the pandemic to gradually recede. The outlook benefits also from an uplift in copper prices and improved global growth expectations, particularly for major trading partners such as the United States and China. Over the medium term, we expect growth to gradually converge to its potential of 2½ percent.

11. Temporary factors that pushed the current account into surplus in 2020 are expected to dissipate, leaving the current account balance close to zero in 2021. Import compression, induced by the COVID-19 shock, coupled with a strong demand for copper, Chile’s main export, produced the first current account surplus in a decade. As the economy recovers from the pandemic, imports of durable and semi-durable consumer goods—which were affected by restrictions on mobility and elevated uncertainty—are expected to rebound, bringing the current account close to zero in 2021 and towards a small deficit over the medium term.

12. To lessen the effects of the pandemic the authorities unveiled a broad set of fiscal measures. The government is implementing a multi-year fiscal package of about US$34 billion (13 percent of 2020 GDP, after an additional 2 percent of GDP was announced in March 2021 to counter the effects of tighter mobility restrictions) to safeguard health, protect incomes and jobs, keep funding costs low, support credit, and buttress the recovery (see IMF Country Report No. 21/83, Annex I). The main elements of the stimulus package includes: (i) higher healthcare spending; (ii) enhanced subsidies and unemployment benefits; (iii) a set of tax deferrals; (iv) credit provision for SMEs, via Banco Estado (a publicly owned bank); (v) transfers for the most vulnerable and the middle-class; (vi) a credit-guarantee scheme for firms (via the public credit-guarantee fund FOGAPE) and for the households; and (vii) enhanced public investment.

13. These measures were accompanied by large withdrawals from the private pension funds. Congress allowed in July and December 2020 two rounds of withdrawals and a third round was approved in April 2021. By early-April 2021, about 10.5 million people have used the first withdrawal and 8 million the second one, corresponding to a total of about US$37 billion (or about 15 percent of 2020 GDP, or 19 percent of June 2020 pension assets). The withdrawals overcompensated the loss of income due to the pandemic for people in all income quintiles, but are expected to lower pension replacement rates while raising public pension costs (staff estimated the net present value cost from the first two withdrawals at about of 3½ percent of 2020 GDP). The withdrawals also often contributed more to an increase in savings than in spending, and the first one was regressive (as it was tax-exempt for all). Notably, after the first two withdrawals, about 3 million people (or ¼ of pension system participants) have exhausted their pension funds. The impact from the first two rounds of withdrawals on the liquidity needs of financial markets was muted, as it was cushioned by the quick and strong reaction by the BCCh (which included a facility with cumulative purchases of US$8.5 billion). For the third round—which notably also allows access for pensioners with lifetime annuities—US$18 billion in withdrawals are expected, which would exhaust the accounts of a further 2 million people (bringing the total to about 5 million).

^{Text Table 1.}

Chile: Fiscal Measures in Response to COVID-19

(In percent of GDP)

^{^1/}Annouced as of June 2020.

^{^2/}Revised in March 2021 with outturns for 2020.

^{^3/}Nets out the effect of tax deferrals.

^{Text Table 1.}

Chile: Fiscal Measures in Response to COVID-19

(In percent of GDP)

					Announced ^{^1/}	Revised ^{^2/}	Cumulative ^{^3/}	2020	2021	2022–2025
Total size of the stimulus package (percent GDP):					11.3	13.3	12.5	6.1	4.2	2.1
	1. On Budget:				8.7	10.8	10.0	5.0	2.9	2.0
		a. Temporary (no effect on end-year deficit):			1.3	1.3	1.3	1.3
			i. Defered taxes:		0.5	0.5	0.5	0.5
				CIT for SMEs	0.2	0.2	0.2	0.2
				Property taxes	0.3	0.3	0.3	0.3
			ii. Accelerated pay of liabilities (no affect on the accrual def		0.8	0.8	0.8	0.8
				Early CIT refunds for SMEs	0.4	0.4	0.4	0.4
				Accelerated pay of public procurement obligations	0.4	0.4	0.4	0.4
		b. Permanent:			7.4	9.5	8.7	3.7	2.9	2.0
			i. Revenues		2.5	1.6	0.8	1.2	-0.4	0.0
				Suspension of CIT payments	1.0	0.9	0.3	0.9	-0.5	-0.1
				VAT delay	0.6	0.2	0.0	0.2	-0.2
				Reduction of the stamp & seals tax	0.2	0.2	0.2	0.2
				Reduction CIT rate to 12.5%	0.3	0.0	0.0	0.0	0.0	0.0
				Instantatenous 100% depreciation	0.4	0.4	0.4	0.0	0.3	0.1
			ii. Spending		4.9	7.9	7.9	2.5	3.3	2.0
				Additional Fiscal Resources for health expenditures	0.9	0.6	0.6	0.5	0.1	0.0
				Other spending	0.0	0.2	0.2	0.1	0.1	0.0
				Transfers for most vulnerable	1.8	2.9	2.9	1.5	1.3	0.0
				Middle-class bonus	0.4	0.9	0.9	0.4	0.5	0.0
				Public investment	1.2	1.2	1.2	0.0	0.4	0.8
				Employment subsidies	0.6	1.0	1.0	0.0	0.7	0.3
				Unallocated	0.0	1.1	1.1	0.0	0.2	0.9
	2. Off-Budget (below the line):				2.6	2.5	2.5	1.1	1.3	0.1
		Injection to the UI Solidarity Fund			0.8	0.0	0.0	0.0	0.0	0.0
		Banco Estado capitalization			0.2	0.3	0.3	0.1	0.2	0.0
		Public loan guarantees (FOGAPE), including Fogape Reactiva			1.2	0.8	0.8	0.4	0.3	0.1
		Solidarity loan for middle class			0.4	1.2	1.2	0.6	0.6	0.0
		Unallocated			0.0	0.2	0.2	0.0	0.2	0.0

^{^1/}Annouced as of June 2020.

^{^2/}Revised in March 2021 with outturns for 2020.

^{^3/}Nets out the effect of tax deferrals.

^{Text Table 1.}

Chile: Fiscal Measures in Response to COVID-19

(In percent of GDP)

					Announced ^{^1/}	Revised ^{^2/}	Cumulative ^{^3/}	2020	2021	2022–2025
Total size of the stimulus package (percent GDP):					11.3	13.3	12.5	6.1	4.2	2.1
	1. On Budget:				8.7	10.8	10.0	5.0	2.9	2.0
		a. Temporary (no effect on end-year deficit):			1.3	1.3	1.3	1.3
			i. Defered taxes:		0.5	0.5	0.5	0.5
				CIT for SMEs	0.2	0.2	0.2	0.2
				Property taxes	0.3	0.3	0.3	0.3
			ii. Accelerated pay of liabilities (no affect on the accrual def		0.8	0.8	0.8	0.8
				Early CIT refunds for SMEs	0.4	0.4	0.4	0.4
				Accelerated pay of public procurement obligations	0.4	0.4	0.4	0.4
		b. Permanent:			7.4	9.5	8.7	3.7	2.9	2.0
			i. Revenues		2.5	1.6	0.8	1.2	-0.4	0.0
				Suspension of CIT payments	1.0	0.9	0.3	0.9	-0.5	-0.1
				VAT delay	0.6	0.2	0.0	0.2	-0.2
				Reduction of the stamp & seals tax	0.2	0.2	0.2	0.2
				Reduction CIT rate to 12.5%	0.3	0.0	0.0	0.0	0.0	0.0
				Instantatenous 100% depreciation	0.4	0.4	0.4	0.0	0.3	0.1
			ii. Spending		4.9	7.9	7.9	2.5	3.3	2.0
				Additional Fiscal Resources for health expenditures	0.9	0.6	0.6	0.5	0.1	0.0
				Other spending	0.0	0.2	0.2	0.1	0.1	0.0
				Transfers for most vulnerable	1.8	2.9	2.9	1.5	1.3	0.0
				Middle-class bonus	0.4	0.9	0.9	0.4	0.5	0.0
				Public investment	1.2	1.2	1.2	0.0	0.4	0.8
				Employment subsidies	0.6	1.0	1.0	0.0	0.7	0.3
				Unallocated	0.0	1.1	1.1	0.0	0.2	0.9
	2. Off-Budget (below the line):				2.6	2.5	2.5	1.1	1.3	0.1
		Injection to the UI Solidarity Fund			0.8	0.0	0.0	0.0	0.0	0.0
		Banco Estado capitalization			0.2	0.3	0.3	0.1	0.2	0.0
		Public loan guarantees (FOGAPE), including Fogape Reactiva			1.2	0.8	0.8	0.4	0.3	0.1
		Solidarity loan for middle class			0.4	1.2	1.2	0.6	0.6	0.0
		Unallocated			0.0	0.2	0.2	0.0	0.2	0.0

^{^1/}Annouced as of June 2020.

^{^2/}Revised in March 2021 with outturns for 2020.

^{^3/}Nets out the effect of tax deferrals.

14. The Central Bank of Chile loosened monetary policy and implemented a wide range of measures to provide liquidity and preserve financial stability. The policy rate was lowered by 125 basis points in March 2020 to 0.5 percent, which is considered by the BCCh as the “effective lower bound”. The monetary policy stance is appropriately accommodative as the policy rate is about 350 basis points below the BCCh’s estimates of the neutral nominal interest rate range (3.75 to 4.35 percent). In addition, the BCCh provided support to FX and local currency funding markets, by: (i) offering FX swaps; (ii) introducing funding-for-lending programs (up to US$40 billion); (iii) expanding its collateral framework (including corporate bonds and the above credit guarantee scheme); (iv) introducing a bank-bonds purchase program; and (v) relaxing the liquidity coverage ratio (the ratio remains unchanged but temporary deviations could be tolerated on a case-by-case basis). The BCCh also negotiated access to the Foreign and International Monetary Authorities Repo Facility. ^²

^{Text Table 2.}

Chile: BCCh Extraordinary Measures

(In US$ millions)

Source: Central Bank of Chile.

^{^1/}Last Updated on March 1, 2021.

^{^2/}Bond buybacks are reported with one day of delay; amounts correspond to the total liquidity injection related to the buyback of bonds.

^{^3/}Amount of the program dollarized using the average exchange rate of February, while the usage is dollarized using the last observed exchange rate.

^{Text Table 2.}

Chile: BCCh Extraordinary Measures

(In US$ millions)

Measures		Amount of the Program	Cumulative Usage Since Announcement ^1/
Domestic Currency Liquidity	BCCh Debt Buyback ^2/ (Start date November 9th, 2019)	8,514 Outstanding Amount of BCP/BCU/PRC/CERO at the start of the program	BCP BCU Others Cumulative Buybacks	5,595 983 83 6,662
	Bank Bonds Purchase Program (Start date March 20th, 2020)	8,000	Inflation Linked Bank Bonds CLP Denominated Bank Bonds Cumulative Purchases	3,621 240 3,861
	Special Assets Purchase Program (Start date June 22th, 2020)	8,000	Total Bought (Whole Program) BCP BCU Cumulative Buybacks (BCP and BCU) Inflation Linked Bank Bonds CLP Denominated Bank Bonds Cumulative Purchases	4,785 628 187 815 3,940 30 3,970
	Purchase of Bank Securities (August 3rd, 2020)	10,000	Cumulative Purchases Outstanding Amount	8,455 2,777
	Purchase of Bank Term Deposits (August 7th, 2020)	8,000	Cumulative Purchases	521
Domestic Currency Liquidity-With-Credit Expansion Incentives	FCIC 1-LCL March 30th, 2020-March 30th, 2024)	24,000	Current Usage	25,240
	Initial Line 3%	4,800	FCIC Usage LCL Usage Total Usage, Initial Line	2,140 3,150 5,290
	Additional Line 12%	19,200	FCIC Usage LCL Usage Total Usage, Initial Line	16,163 3,786 19,949
	FCIC 2 ^3/ (July 9th, 2020- July 1st, 2024)	16,000	Current Usage	5,428

Source: Central Bank of Chile.

^{^1/}Last Updated on March 1, 2021.

^{^2/}Bond buybacks are reported with one day of delay; amounts correspond to the total liquidity injection related to the buyback of bonds.

^{^3/}Amount of the program dollarized using the average exchange rate of February, while the usage is dollarized using the last observed exchange rate.

^{Text Table 2.}

Chile: BCCh Extraordinary Measures

(In US$ millions)

Measures		Amount of the Program	Cumulative Usage Since Announcement ^1/
Domestic Currency Liquidity	BCCh Debt Buyback ^2/ (Start date November 9th, 2019)	8,514 Outstanding Amount of BCP/BCU/PRC/CERO at the start of the program	BCP BCU Others Cumulative Buybacks	5,595 983 83 6,662
	Bank Bonds Purchase Program (Start date March 20th, 2020)	8,000	Inflation Linked Bank Bonds CLP Denominated Bank Bonds Cumulative Purchases	3,621 240 3,861
	Special Assets Purchase Program (Start date June 22th, 2020)	8,000	Total Bought (Whole Program) BCP BCU Cumulative Buybacks (BCP and BCU) Inflation Linked Bank Bonds CLP Denominated Bank Bonds Cumulative Purchases	4,785 628 187 815 3,940 30 3,970
	Purchase of Bank Securities (August 3rd, 2020)	10,000	Cumulative Purchases Outstanding Amount	8,455 2,777
	Purchase of Bank Term Deposits (August 7th, 2020)	8,000	Cumulative Purchases	521
Domestic Currency Liquidity-With-Credit Expansion Incentives	FCIC 1-LCL March 30th, 2020-March 30th, 2024)	24,000	Current Usage	25,240
	Initial Line 3%	4,800	FCIC Usage LCL Usage Total Usage, Initial Line	2,140 3,150 5,290
	Additional Line 12%	19,200	FCIC Usage LCL Usage Total Usage, Initial Line	16,163 3,786 19,949
	FCIC 2 ^3/ (July 9th, 2020- July 1st, 2024)	16,000	Current Usage	5,428

Source: Central Bank of Chile.

^{^1/}Last Updated on March 1, 2021.

^{^2/}Bond buybacks are reported with one day of delay; amounts correspond to the total liquidity injection related to the buyback of bonds.

^{^3/}Amount of the program dollarized using the average exchange rate of February, while the usage is dollarized using the last observed exchange rate.

15. The Financial Market Commission (CMF) unveiled measures to facilitate the flow of credit to businesses and households. They include: (i) a special treatment in the establishment of provisions for deferred loans (while credit quality exposures remain carefully monitored); (ii) use of mortgage guarantees to safeguard loans for SMEs; (iii) adjustments in the treatment of assets received as payment and margins in derivative transactions; and (iv) delay by one year of the implementation of Basel III standards. ^³

16. The overall policy response demonstrates strong policy coordination. The combination of the BCCh funding-for-lending program, the Ministry of Finance credit-guarantee scheme, and the regulatory requirements from the CMF shows strong coordination of the Ministry of Finance, the BCCh, and the CMF in their proactive response to containing liquidity problems that could otherwise become more complicated and significantly affect the financial sector as well as households and firms.

17. The authorities maintain their commitment to fiscal prudence and envisage a gradual structural consolidation to stabilize the debt ratio, though additional fiscal measures may be needed in the medium term. In January 2020, a tax reform was adopted which is expected to gradually raise tax revenues by about 1 ppt of GDP in the medium term. The headline fiscal deficit is expected to decline to 4.1 percent of GDP in 2021 from 7.3 percent in 2020, while the structural balance deficit is expected to worsen from 2.6 to 6.0 percent of GDP. In 2021, the structural balance would deteriorate while the fiscal deficit would improve with respect to 2020, as the output gap would be much smaller, copper prices are above the long-term price, and the 2020 tax deferrals expire. ^⁴ If necessary, fiscal measures can be much better targeted than additional pension withdrawals, which affect pension replacement rates and increase the fiscal cost of providing adequate pensions. Gross debt is expected to increase to 34.6 percent of GDP by end-2021, which remains low by international standards. The authorities remain committed to a structural consolidation, reducing the structural deficit by about 2 percent of GDP in 2022 and then 1 percent of GDP per year starting in 2023, to reach a structural deficit target of 0.9 percent of GDP by 2025, which they estimate would stabilize the gross debt at about 40 percent of GDP. In the short term the priority is to continue to implement targeted measures to protect health, income, and jobs, especially for the most vulnerable segments of the population. Over the medium term, permanent revenue and spending measures would be needed to finance possible additional spending to address social needs, face fiscal contingencies, and rebuild buffers, while preserving debt stability. In this respect, the government is considering the recommendations from a Commission of Experts called by the Minister of Finance (which are aligned with the recommendations from a recent IMF/OECD joint report) for gradually reducing tax exemptions, deductions, and special regimes. Additional measures may include for example broadening direct taxation, raising green taxes towards international standards, and rationalizing expenditures (see IMF Country Report No. 21/83).

18. At the same time, enhancing the fiscal framework would further strengthen policy credibility. It is essential to complement the current rule with a medium-term debt anchor (ideally encompassing a debt ceiling and buffer zone), a formal escape clause that envisages temporary relaxation or suspension of the structural balance target, and an adjustment mechanism that can offset temporary deviations from targets. In this respect, the Autonomous Fiscal Council recently issued valuable recommendations. ^⁵

19. The authorities reiterated their strong commitment to maintaining the inflation targeting framework with a free-floating exchange rate. The appropriately accommodative monetary stance—with the policy rate at the effective lower bound—is consistent with achieving the inflation target at the 2-year policy horizon. In this context, the BCCh kept the policy rate unchanged in its March 2021 monetary policy meeting, reaffirming the need for maintaining the expansionary monetary stance until the recovery of the economy takes hold and spreads to the more lagging components of expenditure, which is likely to take several quarters. The BCCh also continues to operate the unconventional liquidity and credit support measures, complementing the expansionary monetary policy stance. In line with its long-standing policy, the BCCh intends to continue to allow the peso to fluctuate freely, with intervention only limited to address exceptional volatility that could endanger market functioning. The BCCh does not envisage the need for any capital flow management measures (CFMs). Unwinding the extraordinary policy measures should be carefully managed to avoid creating instability particularly as banks transition back to traditional funding sources.

20. The authorities are monitoring financial sector vulnerabilities and remain committed to further strengthening the financial sector regulatory and supervisory framework. The emergency measures are facilitating the flow of credit and supporting income, thus preventing a deterioration in credit quality. Stress tests performed by the authorities indicate that financial stability appears well guarded at this juncture. ^⁶ It remains essential to continue monitoring developments closely, stand ready to intervene to avoid disorderly conditions, and encourage financial institutions to continue assessing credit quality carefully and maintain both prudential lending standards and adequate reporting. The implementation of Basel III requirements would improve the resilience of the financial sector by requiring banks to maintain larger capital buffers than the current ones. As time permits, authorities should devote further attention to pending deficiencies in the current regulatory framework, including in relation to bank resolution, deposit-insurance, insurance companies, financial conglomerates, and FinTech activities (the authorities are already working on most of these initiatives). The upcoming 2021 Financial Sector Assessment Program (FSAP) will conduct a detailed analysis of financial stability policies and risks.

Evolution of Risks and Review of Qualification

A. Evolution of Risks and Exposures

21. Uncertainty about near-term global growth and asset prices have subsided since the FCL request but remain significant. Risks persist in relation to developments of the pandemic, movements in the price of copper, or uncertainty stemming from the outcome of the New Constitution process (although the latter is not expected to affect the institutional capacity to undertake key reforms). Financial market indicators (such as the VIX) no longer imply such extreme uncertainty among investors as seen earlier in 2020. Nonetheless, longer containment and lingering uncertainties about the duration of the outbreak—e.g., if COVID-19 proves hard to eradicate due to new strains or low vaccine effectiveness—and more generally resumed uncertainty about global growth and the cost of capital would weigh on the balance of trade between Chile and the world, and on capital flows.

22. Low global growth due to a prolonged COVID-19 outbreak would lower Chile’s exports and FDI. Chile’s exports held steady through 2020, partly due to the fast recovery in China and the associated surge in the price of copper. Copper prices fell by about 25 percent in the first three months of 2020 but then recovered vigorously, in contrast to staff’s earlier expectations (Chile is the world’s leading exporter of copper, which accounts for about half of its merchandise exports and about 12 percent of the country’s GDP). If external demand were to drop unexpectedly, the effect on the current account would be mitigated by three factors: (i) the effect of low oil prices on the import bill; (ii) low imports due to weak domestic demand; and (iii) lower net income outflows (resulting from two opposing factors, the (positive) effect of lower dividends paid to foreign investors, which is expected to exceed the (negative) effect of lower repatriation of profits by Chilean entities with investments abroad). However, the pressure on the financial account could be considerably larger.

23. A renewed spike in global risk aversion would curtail net capital inflows, particularly portfolio inflows. A sudden stop in gross inflows following the COVID-19 outbreak (in the second quarter of 2020) carried over to the third quarter, when non-residents were net sellers of Chilean assets. However, the effect on the balance of payments was offset by significant sales of foreign assets by resident entities, including the general government and pension funds. Given the large stock of externally held domestic securities and other investments, a prolonged period of net sales by no n-residents would lead to large pressures on the financial account.

24. The external economic stress index (ESI) for Chile indicates a level of stress which, although lower than at the time of the FCL request, remains significant (Box 1). The index reflects movements in four key indicators of risk for Chile’s current and financial account balances: copper prices, trading partners’ growth, emerging markets volatility, and U.S. Treasury yields. The COVID-19 outbreak had pushed the ESI for Chile to one of its lowest levels (meaning high external stress) since the mid-1990s. It has since recovered, but the external environment remains fragile. A downside scenario, in which the effects of the pandemic are prolonged, could keep Chile under high external stress for longer than previously experienced, which could have severe effects on the economy and the balance of payments.

B. Review of Qualification

25. In staff’s assessment, Chile continues to meet the qualification criteria for the FCL. The external position remains sustainable, the sovereign continues to access international markets at favorable rates, and official reserve assets are at comfortable level. Although public debt has r is en, it remains sustainable, and supported by a strong fiscal framework. Inflation is low and stable, supported by a credible inflation targeting framework. The financial sector is sound and effectively supervised.

26. Sustainable external position. The external position of Chile strengthened in 2020. It is assessed as moderately stronger than implied by medium-term fundamentals and desirable policies (see IMF Country Report No. 21/83), with a staff assessed current account gap—the difference between the cyclically adjusted current account balance and the estimated norm—of 1.7 percent of GDP. The 2020 current account was in surplus (1.4 percent of GDP), as imports contracted due to the effect of the COVID-19 outbreak on domestic demand, while exports held steady, strengthening the external position since the time of the FCL approval. The net international investment position (IIP) had narrowed considerably to -14 percent of GDP at end-2019, and improved further to -10 percent of GDP during 2020, mainly due to an increase in the value of foreign assets. It compares favorably by most emerging market standards (apart from Asia, see text chart).

27. Capital account position dominated by private flows. Capital flows to Chile are predominantly private. More than four-fifths of foreign assets (86 percent) and 92 percent of external liabilities are private—as of end-2020, when gross foreign assets and liabilities were US$431.7 billion and US$456.7 billion, respectively. Over the preceding three years, private flows accounted for about 82 percent of total asset flows (FDI, portfolio, and other) and 72 percent of total liability flows (FDI, portfolio, and other). Over the same period, the private sector accounted on average for about 83 percent of total assets and about 94 percent of total IIP liabilities; and private sector holdings accounted for about 95 percent of Chile’s external debt. In 2020, the absolute value of general government plus central bank asset flows accounted for nearly 30 percent of total, an unusually large weight for Chile—but comfortably below half of asset flows—, due to large repatriation of foreign assets to meet pandemic related needs discussed in the 2021 Article IV report (see IMF Country Report No. 21/83). The absolute value of general government plus central bank liability flows was less than 10 percent of total liability flows in 2020.

28. Track record of steady sovereign access to international capital markets on favorable terms. Chile has been enjoying uninterrupted access to international capital markets on favorable terms for several decades. It maintains investment grade status according to the three major rating agencies and is consistently among the highest-rated emerging market countries. ^⁷ Sovereign bond spreads deteriorated at the onset of the pandemic but are back to the median over the past five years (EMBIG and five-year CDS spreads stood at 128 and 59 bps as of March 25, 2021), and compare favorably with peers. The central government has issued external debt in each of the past five years (latest bonds were issued in March and January 2021 for US$1.5 and US$4.3 billion, respectively, and previously in May 2020 for US$2 billion and in January 2020 for US$3.3 billion), with a cumulative amount over that period equivalent to about 580 percent of Chile’s quota at the Fund.

29. Relatively comfortable international reserve position. Gross international reserves remain adequate. The ratio of reserves to the Fund’s reserve adequacy metric (ARA) is below the 100 percent recommended for emerging markets—85 percent at end-2020; 90 percent on average over the preceding three years. ^⁸ Generally, reserves have traced the ARA metric well over time (text chart), falling short of the metric on average over the past four years, while remaining above the 80 percent threshold in any year. In staff’s view, reserves remain adequate due to several mitigating factors. First, in mature market economies, ^⁹ reserves may need to act mainly as a second line of defense against potential foreign exchange funding needs of the financial sector. ^¹⁰ Banks’ external debt was US$23.8 billion (at end-2020), a significant part of which is covered by the liquid segment of banks’ US$25.8 billion in foreign assets. Furthermore, by regulation, banks’ short foreign exchange positions due in thirty days cannot exceed long positions by more than the bank’s capital. Hence, international reserves amply cover estimated potential short-term net FX funding needs of banks. ^¹¹ Second, on top of international reserves, the central government holds about US$22 billion in usable liquid external assets, including US$8.7 billion in the sovereign wealth fund for economic stabilization at end-February 2021 which, if counted as reserves, correspond to approximately 20 percent of the ARA metric. Third, standard benchmarks show that Chile compares favorably to other commodity-intensive mature market economies (e.g., Australia and New Zealand, see text chart; comparisons to other EMs are shown in Figure 9). Reserve coverage of prospective imports is more than twice the standard benchmark, at 7 months, while coverage of broad money and short-term external debt (remaining maturity) is close to benchmarks at 18 and 99 percent respectively. Fourth, the authorities are strongly committed to the free-floating exchange rate regime (with a solid track record of no FX spot intervention in support of the currency since 2002 except for a brief period during the recent social unrest, and of publication of intervention data), which reduces further the need for reserves.

30. Reserve accumulation and other sources of external liquidity. In January 2021, anticipating the authorities’ planned exit from the FCL when it expires in mid-2022, the central bank announced and began a program of gradual reserve accumulation. The pre-announced purchases, to be evenly executed over a fifteen-month period, will lift reserves by US$12 billion (approximately one quarter of the ARA metric), through daily purchases of US$40 million, toward a level in the vicinity of 18 percent of GDP. By mid-April 2021, the central bank had added approximately US$2.8 billion to reserves, through sterilized purchases. Furthermore, the authorities remain open to continue exploring other sources of precautionary financing. In July 2020, the size of a bilateral RMB-CLP currency swap facility between the BCCh and the People’s Bank of China was increased, from RMB22 billion to RMB50 billion (about US$7 billion); and its scope was expanded so that it is no longer limited to the support of bilateral trade transactions. ^¹²

31. Sustainable public debt position and sound public finances. Fiscal policy remains prudent, guided by the fiscal rule, and operationalized via annual structural deficit targets. The authorities maintain their commitment to debt stability in the medium term, if necessary, by undertaking additional revenue and expenditure measures to bring the structural deficit to 0.9 percent of GDP by 2025. In staff calculations, the authorities’ envisaged medium-term fiscal consolidation would stabilize the debt ratio at about 42 percent of GDP. A debt sustainability analysis (Annex I) shows that the debt trajectory is robust to standard shocks (to growth, the exchange rate, and interest rates). Chile’s debt is sustainable with a high probability, due to low debt levels, adequate reserves, significant buffers, sound macro-fundamentals and strong policy track record. Despite adverse global financial conditions, liquidity risks are mitigated by the large domestic banking sector, which has ample room to absorb issuance in the case of external financing disruptions, and sizable assets. A strong fiscal framework, a relatively low level of debt by international standards (both in gross and net terms), and substantial fiscal buffers (including a sovereign wealth fund and other assets) are expected to help Chile undertake countercyclical policies.

Liquid Assets of the Treasury

(In US$ billions)

Sources: Ministry of Finance and IMF staff calculations.

Liquid Assets of the Treasury

(In US$ billions)

		Feb-21
Usable Liquid External Assets		21.8
	Economic and Social Stabilization Fund	8.7
	Pension Reservation Fund	10.1
	FX-denominated Assets of the Public Treasury	3.0
Other Liquid Assets		3.8
	Peso-denominated Assets of the Public Treasury	2.5
	Education Fund	0.2
	Regional Support Fund	0.7
	Fund for High-Cost Diseases	0.4
Total		25.7

Sources: Ministry of Finance and IMF staff calculations.

Liquid Assets of the Treasury

(In US$ billions)

		Feb-21
Usable Liquid External Assets		21.8
	Economic and Social Stabilization Fund	8.7
	Pension Reservation Fund	10.1
	FX-denominated Assets of the Public Treasury	3.0
Other Liquid Assets		3.8
	Peso-denominated Assets of the Public Treasury	2.5
	Education Fund	0.2
	Regional Support Fund	0.7
	Fund for High-Cost Diseases	0.4
Total		25.7

Sources: Ministry of Finance and IMF staff calculations.

32. Low and stable inflation in the context of a sound monetary and exchange rate policy framework. Chile maintains a free-floating exchange rate system and the BCCh has been successful in maintaining inflation around the 3 percent target since the introduction of the inflation-targeting regime in 1999 (with an average of 3.2 percent). Inflation expectations at the 12-month horizon have been firmly anchored to the target over the past 10 years. Due to the high credibility of its monetary policy, the exchange rate pass-through to domestic prices is among the lowest in the region. The BCCh has had a small and negative equity for a long time, which has not compromised policy solvency and does not require immediate recapitalization. Its independence is well-established. For the sake of accountability, the BCCh has voluntarily undergone an independent external evaluation of the conduct of its monetary and financial policy: the expert panel highlighted high standards of policy analysis, conduct, and independence. The BCCh is undergoing a pilot review of its transparency system in light of the new IMF Central Bank Transparency Code, while its monetary policy transparency has been ranked high among inflation-targeting regimes. ^¹³

33. Sound financial system and the absence of solvency problems that may threaten systemic stability. The financial sector appears to be sound overall (see recent developments). The implementation of the new Basel III standard, delayed by one year to confront the pandemic, could result in a temporary decline in the capital adequacy ratio, but this will not represent a meaningful deterioration in banking sector solvency. ^¹⁴ Stress tests performed by the authorities indicate that financial stability appears well guarded at this juncture, although it will be essential to continue monitoring the situation to identify early signs of stress in the system and to stand ready to intervene to avoid disorderly conditions. Systemic risk arising from non-financial sector external debt is low—as about half is FDI-related and the rest is generally hedged against exchange rate risk—but should continue to be monitored, together with SME portfolio health. Pension funds are well-supervised and soundly managed.

34. Effective financial sector supervision. The 2011 FSAP concluded that Chile’s financial regulatory and supervisory system is robust and the 2021 Article IV Consultation report (see IMF Country Report No. 21/83) did not find substantial concerns regarding the supervisory framework. An update of the FSAP is underway—after being delayed to 2021 due to the COVID-19 pandemic—and it will focus on financial institutions and interlinkages, the reorganization of supervisory arrangements, crisis management, bank resolution arrangements, and the need for deposit insurance. Restructuring the supervisory framework is expected to reduce opportunities for regulatory arbitrage that could result from the prevailing conglomerate structure in the financial sector. Basel III alignment and the new supervisory structure are expected to close many of the gaps identified in an otherwise strong supervisory system. Progress remains to be made, however, in terms of early intervention and bank resolution regime. Chile is undergoing an assessment against the Financial Action Task Force (FATF) anti-money laundering/combating the financing of terrorism (AML/CFT) standard by GAFILAT (FATF Latin America regional body), which was subject to delays due to the COVID-19 outbreak and will include a set of recommendations to further strengthen the AML/CFT framework.

35. Data transparency and integrity. Since March 2020, Chile is an adherent to the Fund’s Special Data Dissemination Standard (SDDS) Plus—the highest tier of the IMF’s Data Standards Initiatives.

36. Track record and institutional strength. Chile continues to have a sustained track record of implementing very strong policies, including in response to the unprecedented COVID-19 pandemic, owing to its very strong fiscal and monetary institutional frameworks which have helped create buffers. According to staff’s assessment, all relevant core indicators were met in each of the five most recent years. Chile’s very strong fiscal and monetary institutional frameworks, coupled with one of the highest levels of policy credibility and regulatory quality among emerging markets, allowed an effective adjustment to shocks, including during the Global Financial Crisis as well as the ongoing pandemic. Fiscal and monetary policies show very strong countercyclical responses, while at the same time the country has been relying on the shock absorbing power of the free-floating exchange rate regime, and on maintaining open capital accounts.

C. Exit Strategy

37. The authorities remain intent on exiting the FCL arrangement at the end of the 24-month period (May 28, 2022), conditional on interim developments. The authorities’ permanent strategy for medium term resilience remains anchored in very strong macroeconomic policies and in further strengthening the regulatory environment and buffers. In the near term, the Chilean authorities indicated their intention to exit from FCL support in May 2022, conditional on economic and financial developments. In preparation, they have already commenced increasing reserves through intervention purchases of FX.

Safeguards

38. Staff has completed the safeguards procedures for Chile’s FCL arrangement. The Banco Central de Chile’s (BCCh) external audit and financial reporting reflect leading practices. KPMG Chile issued an unmodified (clean) audit opinion on the BCCh financial statements for 2019, which are prepared and audited in accordance with international standards. The financial statements include comprehensive disclosures and are published on a timely basis. Staff reviewed the 2019 audit results and held discussions with the BCCh and KPMG Chile. No significant issues emerged from the conduct of these procedures.

Staff Appraisal

39. Chile’s FCL arrangement has supported the authorities’ deep and effective policy efforts amid a very uncertain environment. The FCL arrangement has contributed to the country’s resilience in the face of the pandemic, complementing the large policy response in the context of strong policy and institutional frameworks, as witnessed by the low level of public debt by international standards, well anchored inflation expectations, and a sound financial system. The authorities are not requesting a change in access, and have indicated their intent to continue treating the FCL as precautionary and exit from the FCL arrangement in May 2022.

40. Staff’s assessment is that Chile continues to meet the qualification criteria for access to FCL resources. As recognized in the 2021 Article IV consultation report (IMF Country Report No. 21/83), Chile has very strong economic fundamentals and institutional policy frameworks, along with a sustained track record of implementing very strong macroeconomic policies that have helped the country safeguard lives and livelihoods in the face of an unprecedented global shock. The authorities remain committed to maintaining prudent policies in the future. Thus, staff recommends completion of the review under the FCL arrangement for Chile.

^{Box 1.}

External Economic Stress Index

The level of external economic stress faced by Chile eased significantly after the first quarter of 2020. An adverse scenario with a prolonged pandemic, lower copper prices and another spike in global risk aversion would increase external pressure again, easing gradually in 2022.

The external economic stress index (ESI) is a compact measure of the external pressure faced by a specific economy. It is constructed in three steps: (i) identify the key external risks on the basis of the structure of the economy; (ii) choose proxies to capture these risks; and (iii) weigh them. The index is a weighted sum of standardized deviations of each proxy from its mean.^¹

Low growth in trading partners, low copper prices, and tight financing conditions are the main external risks for Chile. Risks to exports are proxied by output growth in the U.S. and China, while risks to the copper industry, including inward FDI, are proxied by international copper prices. The open financial account, coupled with large stocks of debt and portfolio investment liabilities, expose Chile to changes in global financial conditions (although this exposure is partly mitigated by domestic institutional investors’ large holdings of foreign assets), which are proxied by the emerging markets volatility index (VXEEM) and the yield on 10-year U.S. Treasuries (detrended). The choice of the weights draws on the balance of payments and international investment position data, expressed in shares of GDP and normalized. The weight on growth in the U.S. and China (0.15) reflects the main export markets; ^² the weight on the price of copper (0.35) reflects copper exports and FDI liabilities (adjusted to reflect the likelihood that copper and oil prices move in the same direction); the weights on the VXEEM (0.25) and the U.S. long-term yield (0.25) represent the relevance of stocks of portfolio and debt-like liabilities.

The index shows a fast improvement in external conditions, after the precipitous fall during the COVID-19 outbreak, but the external environment remains delicate. The box figure shows the evolution of the ESI for Chile. Its negative values capture episodes of high external stress: the Latin American crises in 1995 and 2002, the East Asian and Russian crises in 1997–98, the dot-com crash in 2001, U.S. financial crisis in 2007–08, the Euro Area debt crisis in 2011, the taper tantrum in 2013, the Chinese stock market crash in 2015, and COVID-19 in 2020. The baseline forecast reflects WEO projections for U.S. and Chinese growth, copper prices, and the U.S. 10-year bond yield. The VXEEM is assumed to return to its average level.

The adverse scenario envisages a prolonged pandemic and another spike in global risk aversion. The downside scenario assumes lower growth in Chile’s main export markets relative to baseline, in 2021 and 2022, in magnitudes consistent with the April 2021 WEO. Copper prices are assumed to fall towards approximately $3,200 per ton, equivalent to about 160 cents per pound (close to its lowest level during the GFC). Renewed stress in financial markets is assumed to move the volatility index VXEEM up by two standard deviations. In this scenario, Chile would remain under a significant level of external stress through 2021, with the pressure abating gradually in 2022.

^¹ The methodology is explained in Flexible Credit Line—Operational Guidance Note, IMF Policy Paper, August 2018. ^² China and the U.S. account (directly) for 32 and 14 percent, respectively, of Chile’s total exports in 2019.

^{Table 1.}

Chile: Selected Social and Economic Indicators ^1/

Sources: Central Bank of Chile, Ministry of Finance, Haver Analytics, and IMF staff calculations and projections.

^{^1/}The annual numbers occasionally show a small discrepancy with the authorities’ published figures, as they are calculated as the sum of the quarterly series seasonally-adjusted by staff.

^{^2/}Investment is defined as: gross fixed capital formation + changes in inventories.

^{^3/}Contribution to growth.

^{^4/}Includes liabilities of the central government, the Central Bank of Chile and public enterprises. Excludes Recognition Bonds.

^{Table 1.}

Chile: Selected Social and Economic Indicators ^1/

GDP (2019), in billions of pesos	196,397	Quota
GDP (2019), in billions of U.S. dollars	279.3		in millions of SDRs	1,744
Per capita (2019), U.S. dollars	14,621		in % of total	0.37
Population (2019), in millions	19.1	Poverty rate (2017)		8.60
Main products and exports	Copper	Gini coefficient (2017)		46.60
Key export markets	China, Euro area, U.S.	Literacy rate (2015)		99.2

							Est.	Proj.
					2018	2019	2020	2021	2022	2023	2024	2025	2026
					(Annual percentage change, unless otherwise specified)
Output
Real GDP					3.7	1.0	-5.8	6.5	3.7	2.7	2.6	2.5	2.5
	Total domestic demand				4.5	0.9	-9.3	8.7	3.8	2.8	2.5	2.5	2.4
		Consumption			3.7	0.9	-6.9	9.1	4.2	2.9	2.1	2.4	2.2
			Private		3.8	1.1	-7.7	10.0	4.9	3.2	2.3	2.7	2.6
			Public		3.4	0.0	-3.7	5.6	0.5	1.3	1.0	0.9	-0.1
		Investment ^2/			7.3	1.0	-17.7	7.3	2.4	2.2	4.4	2.8	3.3
			Fixed		5.1	4.5	-11.5	7.4	4.0	3.5	4.3	1.9	1.4
				Private	6.1	5.2	-11.2	6.0	2.3	5.3	4.6	2.7	1.8
				Public	-2.5	-1.2	-14.3	20.2	17.8	-9.5	2.0	-5.6	-2.6
			Inventories ^3/		0.5	-0.7	-1.4	-0.1	-0.4	-0.3	-0.1	0.1	0.4
		Net exports ^3/			-0.9	0.0	3.5	-1.9	-0.1	-0.1	0.0	0.0	0.1
			Exports		5.3	-2.6	-1.1	1.9	4.6	3.2	2.8	2.7	2.7
			Imports		8.1	-2.3	-12.8	8.7	5.1	3.5	2.7	2.6	2.3
Employment
Unemployment rate (annual average)					7.4	7.2	10.8	8.9	8.2	7.7	7.4	7.2	7.2
Consumer prices
Inflation (End of period, %)					2.1	3.0	2.9	3.0	3.0	3.0	3.0	3.0	3.0
Inflation (average, %)					2.3	2.3	3.0	3.1	3.0	3.0	3.0	3.0	3.0
					(In percent of GDP, unless otherwise specified)
Public sector finances
Central government revenue					22.0	21.7	19.9	23.3	22.8	22.7	23.1	23.1	23.1
Central government expenditure					23.7	24.5	27.2	27.4	25.9	24.9	24.6	24.0	24.0
Central government fiscal balance					-1.7	-2.9	-7.3	-4.1	-3.1	-2.2	-1.5	-0.9	-0.9
Structural Fiscal Balance					-1.5	-1.7	-2.6	-6.0	-3.9	-2.9	-1.9	-0.9	-0.9
Structural Non-Mining Primary Balance (% of NGDP)					-2.4	-3.0	-3.6	-6.2	-4.7	-3.7	-2.5	-1.8	-1.7
Central Government Gross Debt					25.6	28.2	32.5	34.6	38.1	40.5	41.6	42.0	41.7
	of which, FX-denominated Debt				5.1	5.8	7.3	8.5	9.2	9.8	10.5	10.5	10.5
Central Government Net Debt					5.7	8.2	10.9	14.3	17.0	18.8	19.9	20.3	20.6
Public sector gross debt ^4/					45.5	49.1	55.2	57.2	60.7	63.1	64.2	64.7	64.3
		Of which, share of FX-denominated Debt (in %)			19.8	20.6	22.6	24.7	24.1	24.3	25.2	24.9	25.2
					(Annual percentage change, unless otherwise specified)
Money and credit
Broad money					11.2	9.4	1.9	11.1	6.4	5.1	4.9	5.0	5.2
Credit to the private sector					10.1	9.7	3.2	…	…	…	…	…	…
Balance of payments
Current account (% of GDP)					-3.9	-3.7	1.4	0.0	-0.3	-0.5	-0.7	-0.8	-0.9
Current account (in billions of U.S. dollars)					-11.6	-10.4	3.4	0.0	-0.9	-1.7	-2.6	-2.9	-3.6
Foreign direct investment net flows (% of GDP)					-2.2	-1.2	1.3	-1.5	-1.0	-1.0	-0.8	-0.7	-1.0
Gross international reserves (in billions of U.S. dollars)					39.9	40.7	39.2	48.2	51.2	51.2	51.2	51.2	51.2
	Gross Reserves (Months of next year import)				6.4	5.7	5.9	8.7	7.6	7.4	7.1	6.8	6.5
Gross external debt (% of GDP)					61.6	70.6	82.7	72.2	71.2	70.5	69.8	68.5	67.2
	Public				8.3	10.7	13.8	12.8	13.2	13.7	14.1	14.0	13.8
	Private				53.3	59.9	68.9	59.4	58.0	56.8	55.6	54.5	53.4
					(Annual percentage change)
Relative prices
Real effective exchange rate (real appreciation +)					1.4	-4.8	-8.2	…	…	…	…	…	…
Terms of trade					-2.8	-1.7	10.1	12.5	-0.1	-1.2	-2.0	-1.8	-1.0
Memorandum items
	Nominal GDP (in billions of pesos)				190,722	196,397	200,224	222,496	236,801	248,967	261,287	274,283	288,582
		(percentage change)			6.2	3.0	1.9	11.1	6.4	5.1	4.9	5.0	5.2
	Nominal GDP (in billions of USD)				297.4	279.3	252.8	312.1	331.9	349.0	366.3	384.2	403.6
		(percentage change)			7.4	-6.1	-9.5	23.5	6.3	5.2	5.0	4.9	5.1

Sources: Central Bank of Chile, Ministry of Finance, Haver Analytics, and IMF staff calculations and projections.

^{^1/}The annual numbers occasionally show a small discrepancy with the authorities’ published figures, as they are calculated as the sum of the quarterly series seasonally-adjusted by staff.

^{^2/}Investment is defined as: gross fixed capital formation + changes in inventories.

^{^3/}Contribution to growth.

^{^4/}Includes liabilities of the central government, the Central Bank of Chile and public enterprises. Excludes Recognition Bonds.

^{Table 1.}

Chile: Selected Social and Economic Indicators ^1/

GDP (2019), in billions of pesos	196,397	Quota
GDP (2019), in billions of U.S. dollars	279.3		in millions of SDRs	1,744
Per capita (2019), U.S. dollars	14,621		in % of total	0.37
Population (2019), in millions	19.1	Poverty rate (2017)		8.60
Main products and exports	Copper	Gini coefficient (2017)		46.60
Key export markets	China, Euro area, U.S.	Literacy rate (2015)		99.2

							Est.	Proj.
					2018	2019	2020	2021	2022	2023	2024	2025	2026
					(Annual percentage change, unless otherwise specified)
Output
Real GDP					3.7	1.0	-5.8	6.5	3.7	2.7	2.6	2.5	2.5
	Total domestic demand				4.5	0.9	-9.3	8.7	3.8	2.8	2.5	2.5	2.4
		Consumption			3.7	0.9	-6.9	9.1	4.2	2.9	2.1	2.4	2.2
			Private		3.8	1.1	-7.7	10.0	4.9	3.2	2.3	2.7	2.6
			Public		3.4	0.0	-3.7	5.6	0.5	1.3	1.0	0.9	-0.1
		Investment ^2/			7.3	1.0	-17.7	7.3	2.4	2.2	4.4	2.8	3.3
			Fixed		5.1	4.5	-11.5	7.4	4.0	3.5	4.3	1.9	1.4
				Private	6.1	5.2	-11.2	6.0	2.3	5.3	4.6	2.7	1.8
				Public	-2.5	-1.2	-14.3	20.2	17.8	-9.5	2.0	-5.6	-2.6
			Inventories ^3/		0.5	-0.7	-1.4	-0.1	-0.4	-0.3	-0.1	0.1	0.4
		Net exports ^3/			-0.9	0.0	3.5	-1.9	-0.1	-0.1	0.0	0.0	0.1
			Exports		5.3	-2.6	-1.1	1.9	4.6	3.2	2.8	2.7	2.7
			Imports		8.1	-2.3	-12.8	8.7	5.1	3.5	2.7	2.6	2.3
Employment
Unemployment rate (annual average)					7.4	7.2	10.8	8.9	8.2	7.7	7.4	7.2	7.2
Consumer prices
Inflation (End of period, %)					2.1	3.0	2.9	3.0	3.0	3.0	3.0	3.0	3.0
Inflation (average, %)					2.3	2.3	3.0	3.1	3.0	3.0	3.0	3.0	3.0
					(In percent of GDP, unless otherwise specified)
Public sector finances
Central government revenue					22.0	21.7	19.9	23.3	22.8	22.7	23.1	23.1	23.1
Central government expenditure					23.7	24.5	27.2	27.4	25.9	24.9	24.6	24.0	24.0
Central government fiscal balance					-1.7	-2.9	-7.3	-4.1	-3.1	-2.2	-1.5	-0.9	-0.9
Structural Fiscal Balance					-1.5	-1.7	-2.6	-6.0	-3.9	-2.9	-1.9	-0.9	-0.9
Structural Non-Mining Primary Balance (% of NGDP)					-2.4	-3.0	-3.6	-6.2	-4.7	-3.7	-2.5	-1.8	-1.7
Central Government Gross Debt					25.6	28.2	32.5	34.6	38.1	40.5	41.6	42.0	41.7
	of which, FX-denominated Debt				5.1	5.8	7.3	8.5	9.2	9.8	10.5	10.5	10.5
Central Government Net Debt					5.7	8.2	10.9	14.3	17.0	18.8	19.9	20.3	20.6
Public sector gross debt ^4/					45.5	49.1	55.2	57.2	60.7	63.1	64.2	64.7	64.3
		Of which, share of FX-denominated Debt (in %)			19.8	20.6	22.6	24.7	24.1	24.3	25.2	24.9	25.2
					(Annual percentage change, unless otherwise specified)
Money and credit
Broad money					11.2	9.4	1.9	11.1	6.4	5.1	4.9	5.0	5.2
Credit to the private sector					10.1	9.7	3.2	…	…	…	…	…	…
Balance of payments
Current account (% of GDP)					-3.9	-3.7	1.4	0.0	-0.3	-0.5	-0.7	-0.8	-0.9
Current account (in billions of U.S. dollars)					-11.6	-10.4	3.4	0.0	-0.9	-1.7	-2.6	-2.9	-3.6
Foreign direct investment net flows (% of GDP)					-2.2	-1.2	1.3	-1.5	-1.0	-1.0	-0.8	-0.7	-1.0
Gross international reserves (in billions of U.S. dollars)					39.9	40.7	39.2	48.2	51.2	51.2	51.2	51.2	51.2
	Gross Reserves (Months of next year import)				6.4	5.7	5.9	8.7	7.6	7.4	7.1	6.8	6.5
Gross external debt (% of GDP)					61.6	70.6	82.7	72.2	71.2	70.5	69.8	68.5	67.2
	Public				8.3	10.7	13.8	12.8	13.2	13.7	14.1	14.0	13.8
	Private				53.3	59.9	68.9	59.4	58.0	56.8	55.6	54.5	53.4
					(Annual percentage change)
Relative prices
Real effective exchange rate (real appreciation +)					1.4	-4.8	-8.2	…	…	…	…	…	…
Terms of trade					-2.8	-1.7	10.1	12.5	-0.1	-1.2	-2.0	-1.8	-1.0
Memorandum items
	Nominal GDP (in billions of pesos)				190,722	196,397	200,224	222,496	236,801	248,967	261,287	274,283	288,582
		(percentage change)			6.2	3.0	1.9	11.1	6.4	5.1	4.9	5.0	5.2
	Nominal GDP (in billions of USD)				297.4	279.3	252.8	312.1	331.9	349.0	366.3	384.2	403.6
		(percentage change)			7.4	-6.1	-9.5	23.5	6.3	5.2	5.0	4.9	5.1

Sources: Central Bank of Chile, Ministry of Finance, Haver Analytics, and IMF staff calculations and projections.

^{^1/}The annual numbers occasionally show a small discrepancy with the authorities’ published figures, as they are calculated as the sum of the quarterly series seasonally-adjusted by staff.

^{^2/}Investment is defined as: gross fixed capital formation + changes in inventories.

^{^3/}Contribution to growth.

^{^4/}Includes liabilities of the central government, the Central Bank of Chile and public enterprises. Excludes Recognition Bonds.

^{Table 2.}

Chile: Summary Operations of the Central Government

(In percent of GDP; unless otherwise specified)

Sources: Ministry of Finance and IMF staff calculations and projections.

^{^1/}The output gap used for the structural adjustment calculation is measured as the difference between staff’s real GDP and the potential GDP of the committee of experts for years for which it is available and binding. Beyond those years, the output gap is progressively closed over time taking into account staff’s assessment of the state of the economy.

^{^2/}The Fiscal Impulse is defined as the negative of the annual change of the structural non-mining primary balance.

^{^3/}Includes liabilities of the central government, the cental bank of Chile and non-financial public enterprises. Excludes Recognition Bonds.

^{^4/}Includes the central government and municipality governments.

^{Table 2.}

Chile: Summary Operations of the Central Government

(In percent of GDP; unless otherwise specified)

									Est.	Proj.
							2018	2019	2020	2021	2022	2023	2024	2025	2026
Revenues							22.0	21.7	19.9	23.3	22.8	22.7	23.1	23.1	23.1
		Taxes					18.0	17.6	16.1	18.8	18.4	18.3	19.1	19.1	19.1
					Private mining companies		0.8	1.0	0.7	1.2	1.2	1.0	1.0	0.9	0.9
					Other tax revenues, non-mining		17.2	16.6	15.5	17.6	17.3	17.3	18.1	18.2	18.2
			Social contributions				1.5	1.5	1.6	1.6	1.6	1.6	1.6	1.6	1.6
			Grants				0.1	0.1	0.1	0.0	0.0	0.0	0.0	0.0	0.0
			Other revenue				2.5	2.4	2.2	2.9	2.8	2.8	2.4	2.3	2.3
					Codelco revenues		0.6	0.4	0.5	1.2	1.2	1.1	0.8	0.7	0.6
					Income on assets		0.5	0.6	0.4	0.5	0.6	0.6	0.6	0.6	0.6
					Operating income		0.5	0.5	0.4	0.4	0.3	0.3	0.3	0.3	0.3
					Other income		1.0	1.0	0.8	0.9	0.7	0.7	0.7	0.7	0.8
Expenditures							23.7	24.5	27.2	27.4	25.9	24.9	24.6	24.0	24.0
		Expense					21.7	22.5	25.4	25.4	23.5	22.8	22.6	22.1	22.1
				Compensation of employees			4.8	5.0	5.3	5.2	5.0	5.0	5.0	5.0	5.0
				Purchases of goods and services			1.9	2.0	2.2	2.1	2.0	1.9	1.8	1.8	1.7
				Interest payments			0.8	0.9	1.0	1.1	1.1	1.2	1.3	1.3	1.4
				Subsidies and grants			8.4	8.8	11.0	11.2	9.6	8.9	8.6	8.2	8.2
				Social benefits			4.0	4.0	4.3	4.0	4.0	4.0	4.0	4.0	4.0
				Other expense			1.7	1.8	1.7	1.8	1.8	1.8	1.8	1.8	1.8
						Capital transfers	1.6	1.7	1.6	1.7	1.7	1.7	1.7	1.7	1.7
		Net acquistion of nonfinancial assets					2.0	2.0	1.8	2.0	2.3	2.0	2.0	1.9	1.9
				Investment			2.0	2.1	1.8	2.0	2.3	2.1	2.1	1.9	1.9
				Sale of physical assets			0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0
Net lending/borrowing							-1.7	-2.9	-7.3	-4.1	-3.1	-2.2	-1.5	-0.9	-0.9
	Non-mining overall balance						-3.0	-4.2	-8.5	-6.4	-5.4	-4.3	-3.3	-2.5	-2.5
Net financial transactions							-1.7	-2.9	-7.3	-4.1	-3.1	-2.2	-1.5	-0.9	-0.9
		Net acquistion of financial assets					0.0	-0.6	-3.2	0.7	2.1	1.6	1.1	1.1	0.4
		Net incurrence of liabilities					1.7	2.2	4.1	4.8	5.1	3.8	2.5	2.0	1.3
				Domestic			1.3	1.9	2.7	3.2	4.1	2.8	1.5	1.5	0.8
				External			0.7	0.5	1.6	1.7	1.1	1.1	1.1	0.5	0.5
				Recognition bonds			-0.3	-0.2	-0.2	-0.2	-0.1	-0.1	-0.1	0.0	0.0
Memorandum items
		Primary balance					-1.3	-2.5	-6.8	-3.5	-2.5	-1.6	-0.8	-0.2	-0.1
		Structural Fiscal Balance ^1/					-1.5	-1.7	-2.6	-6.0	-3.9	-2.9	-1.9	-0.9	-0.9
			Structural Revenue ^1/				22.2	22.8	24.6	21.4	22.0	22.0	22.7	23.1	23.1
			Fiscal Impulse ^2/				0.1	0.6	0.7	2.6	-1.5	-1.0	-1.2	-0.8	-0.1
		Expenditure growth (in real terms; annual percent change)					3.6	4.2	9.9	8.5	-2.4	-1.8	0.8	-0.8	2.1
		Central Government Net Debt					5.7	8.2	10.9	14.3	17.0	18.8	19.9	20.3	20.6
			Gross debt				25.6	28.2	32.5	34.6	38.1	40.5	41.6	42.0	41.7
			Peso-denominated assets				7.6	8.0	8.2	7.6	7.9	8.2	8.2	8.2	8.0
			Foreign currency-denominated assets				12.3	12.1	13.5	12.6	13.2	13.5	13.5	13.5	13.1
		Central Government Net Debt (Excl Pension Reservation Fund)					9.2	12.3	14.5	17.7	20.4	22.3	23.3	23.8	24.1
		Public Sector Gross Debt ^3/					45.5	49.1	55.2	57.2	60.7	63.1	64.2	64.7	64.3
		Public Sector Net Debt ^3/					9.8	11.8	15.0	18.4	21.1	23.0	24.0	24.4	24.7
		Nominal GDP (trillions of pesos)					190.7	196.4	200.2	222.5	236.8	249.0	261.3	274.3	288.6
		General Government Fiscal Balance ^4/					-1.5	-2.7	-7.2	-3.9	-2.9	-2.1	-1.3	-0.7	-0.7

Sources: Ministry of Finance and IMF staff calculations and projections.

^{^2/}The Fiscal Impulse is defined as the negative of the annual change of the structural non-mining primary balance.

^{^3/}Includes liabilities of the central government, the cental bank of Chile and non-financial public enterprises. Excludes Recognition Bonds.

^{^4/}Includes the central government and municipality governments.

^{Table 2.}

Chile: Summary Operations of the Central Government

(In percent of GDP; unless otherwise specified)

									Est.	Proj.
							2018	2019	2020	2021	2022	2023	2024	2025	2026
Revenues							22.0	21.7	19.9	23.3	22.8	22.7	23.1	23.1	23.1
		Taxes					18.0	17.6	16.1	18.8	18.4	18.3	19.1	19.1	19.1
					Private mining companies		0.8	1.0	0.7	1.2	1.2	1.0	1.0	0.9	0.9
					Other tax revenues, non-mining		17.2	16.6	15.5	17.6	17.3	17.3	18.1	18.2	18.2
			Social contributions				1.5	1.5	1.6	1.6	1.6	1.6	1.6	1.6	1.6
			Grants				0.1	0.1	0.1	0.0	0.0	0.0	0.0	0.0	0.0
			Other revenue				2.5	2.4	2.2	2.9	2.8	2.8	2.4	2.3	2.3
					Codelco revenues		0.6	0.4	0.5	1.2	1.2	1.1	0.8	0.7	0.6
					Income on assets		0.5	0.6	0.4	0.5	0.6	0.6	0.6	0.6	0.6
					Operating income		0.5	0.5	0.4	0.4	0.3	0.3	0.3	0.3	0.3
					Other income		1.0	1.0	0.8	0.9	0.7	0.7	0.7	0.7	0.8
Expenditures							23.7	24.5	27.2	27.4	25.9	24.9	24.6	24.0	24.0
		Expense					21.7	22.5	25.4	25.4	23.5	22.8	22.6	22.1	22.1
				Compensation of employees			4.8	5.0	5.3	5.2	5.0	5.0	5.0	5.0	5.0
				Purchases of goods and services			1.9	2.0	2.2	2.1	2.0	1.9	1.8	1.8	1.7
				Interest payments			0.8	0.9	1.0	1.1	1.1	1.2	1.3	1.3	1.4
				Subsidies and grants			8.4	8.8	11.0	11.2	9.6	8.9	8.6	8.2	8.2
				Social benefits			4.0	4.0	4.3	4.0	4.0	4.0	4.0	4.0	4.0
				Other expense			1.7	1.8	1.7	1.8	1.8	1.8	1.8	1.8	1.8
						Capital transfers	1.6	1.7	1.6	1.7	1.7	1.7	1.7	1.7	1.7
		Net acquistion of nonfinancial assets					2.0	2.0	1.8	2.0	2.3	2.0	2.0	1.9	1.9
				Investment			2.0	2.1	1.8	2.0	2.3	2.1	2.1	1.9	1.9
				Sale of physical assets			0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0
Net lending/borrowing							-1.7	-2.9	-7.3	-4.1	-3.1	-2.2	-1.5	-0.9	-0.9
	Non-mining overall balance						-3.0	-4.2	-8.5	-6.4	-5.4	-4.3	-3.3	-2.5	-2.5
Net financial transactions							-1.7	-2.9	-7.3	-4.1	-3.1	-2.2	-1.5	-0.9	-0.9
		Net acquistion of financial assets					0.0	-0.6	-3.2	0.7	2.1	1.6	1.1	1.1	0.4
		Net incurrence of liabilities					1.7	2.2	4.1	4.8	5.1	3.8	2.5	2.0	1.3
				Domestic			1.3	1.9	2.7	3.2	4.1	2.8	1.5	1.5	0.8
				External			0.7	0.5	1.6	1.7	1.1	1.1	1.1	0.5	0.5
				Recognition bonds			-0.3	-0.2	-0.2	-0.2	-0.1	-0.1	-0.1	0.0	0.0
Memorandum items
		Primary balance					-1.3	-2.5	-6.8	-3.5	-2.5	-1.6	-0.8	-0.2	-0.1
		Structural Fiscal Balance ^1/					-1.5	-1.7	-2.6	-6.0	-3.9	-2.9	-1.9	-0.9	-0.9
			Structural Revenue ^1/				22.2	22.8	24.6	21.4	22.0	22.0	22.7	23.1	23.1
			Fiscal Impulse ^2/				0.1	0.6	0.7	2.6	-1.5	-1.0	-1.2	-0.8	-0.1
		Expenditure growth (in real terms; annual percent change)					3.6	4.2	9.9	8.5	-2.4	-1.8	0.8	-0.8	2.1
		Central Government Net Debt					5.7	8.2	10.9	14.3	17.0	18.8	19.9	20.3	20.6
			Gross debt				25.6	28.2	32.5	34.6	38.1	40.5	41.6	42.0	41.7
			Peso-denominated assets				7.6	8.0	8.2	7.6	7.9	8.2	8.2	8.2	8.0
			Foreign currency-denominated assets				12.3	12.1	13.5	12.6	13.2	13.5	13.5	13.5	13.1
		Central Government Net Debt (Excl Pension Reservation Fund)					9.2	12.3	14.5	17.7	20.4	22.3	23.3	23.8	24.1
		Public Sector Gross Debt ^3/					45.5	49.1	55.2	57.2	60.7	63.1	64.2	64.7	64.3
		Public Sector Net Debt ^3/					9.8	11.8	15.0	18.4	21.1	23.0	24.0	24.4	24.7
		Nominal GDP (trillions of pesos)					190.7	196.4	200.2	222.5	236.8	249.0	261.3	274.3	288.6
		General Government Fiscal Balance ^4/					-1.5	-2.7	-7.2	-3.9	-2.9	-2.1	-1.3	-0.7	-0.7

Sources: Ministry of Finance and IMF staff calculations and projections.

^{^2/}The Fiscal Impulse is defined as the negative of the annual change of the structural non-mining primary balance.

^{^3/}Includes liabilities of the central government, the cental bank of Chile and non-financial public enterprises. Excludes Recognition Bonds.

^{^4/}Includes the central government and municipality governments.

^{Table 3.}

Chile: Balance of Payments ^1/

(In millions of US$; unless otherwise specified)

Sources; Central Bank of Chile, Haver Analytics, and IMF staff calculations and projections.

^{^1/}The annual numbers occasionally show a small discrepancy with the authorities published figures, as they are calculated as the sum of the quarterly series sea son ally-adjusted by staff.

^{^2/}Excluding change in reserves.

^{Table 3.}

Chile: Balance of Payments ^1/

(In millions of US$; unless otherwise specified)

						Est.	Proj.
				2018	2019	2020	2021	2022	2023	2024	2025	2026
Current account				-11,623	-10,364	3,438	-15	-887	-1,742	-2,599	-2,922	-3,647
Trade balance of Goods				4,229	2,894	18,438	25,346	26,035	25,568	24,830	24,158	24,483
	Exports			74,706	68,780	73,490	91,352	94,593	96,675	93,943	101,377	104,560
		Copper		35,648	32,604	37,779	51,474	53,287	54,120	54,773	55.577	57,148
		N on- copper		39,058	36.177	35,711	39,878	41,311	42,555	44,170	45,800	47,412
	Imports			70,477	65,887	55,052	66,006	68,563	71,107	74,114	77,219	80,077
Net services				-4,670	-5.104	-4,999	-4,580	-5,043	-5,532	-6,002	-6,276	-6,393
Net income				-13,532	-10,144	-10,963	-21,920	-22,964	-22,798	-22,373	-21,683	-22,613
Net transfers				2,350	1.840	962	1,139	1,085	1,020	946	879	876
Capital account balance				43	672	1	0	0	0	0	0	0
Financial account balance				-12,748	-9,047	3,890	-9,015	-3,887	-1,742	-2,599	-2,922	-3,647
	Foreign direct investment			-6,450	-3,247	3.197	-4,812	-3,373	-3,459	-2,868	-2,771	-4,006
		Abroad by Chilean residents		1,309	9,340	11,725	6,878	6,555	7,161	8,332	8,130	7,411
		In Chile by foreign residents		7,760	12,587	8,528	11,690	9,928	10,620	11,200	10,902	11,418
			Of which, debt instruments	-616	1,997	924	1,098	614	845	1,150	971	983
	Portfolio investment			-2,536	-9,517	-12,304	-5,472	-7,937	-9,260	-9,175	-8,357	-9,135
		Abroad by Chilean residents		2,396	1,667	-5,377	3,844	673	212	-170	1.197	503
		In Chile by foreign residents		4,934	11,184	6,926	9,316	8,610	9,472	9,006	9,554	9,638
			Of which, equities	-1,557	2,968	204	274	253	278	265	281	283
			Of which, debt	6,490	8,217	6,723	9,042	8,357	9,193	3,741	9,273	9,355
	Financial derivatives			832	1,520	2,524	2,523	2,523	2,523	2,523	2,523	2,523
	Other investments			-4,643	2,198	10,474	-1,254	4,900	8,453	6,922	5,683	6,971
		Abroad by Chilean residents		-712	2,974	7,845	7,845	7,845	7,845	7,845	7,845	7,845
		In Chile by foreign residents		3,930	777	-2,629	9,099	2,945	-608	923	2,162	874
Change in reserves assets				1,397	-153	-2,895	9,000	3,000	0	0	0	0
Errors and omissions				230	493	-2,443	0	0	0	0	0	0
Gross official international reserves				6.4	5.7	5.9	8.7	7.6	7.4	7.1	6.3	6.5
	(In months of imports of goods and services)
				(In percent of GDP)
Current account				-3.9	-3.7	1.4	0.0	-0.3	-2.5	-0.7	-8.3	-0 9
Trade balance of Good;				1 4	1.0	7.3	8.1	7.8	7.3	6.8	6.3	6.1
	Exports			25.1	24.6	29.1	29.3	28.5	27.7	27.0	26.4	25.9
		Copper		12.0	11.7	14.9	16.5	16.1	15.1	15.0	14.5	14.2
		Non-copper		13.1	13.0	14.1	12.3	12.4	12.2	12.1	11.9	11.7
	Imports			23.7	23.6	21.8	21.1	20.7	20.4	20.2	28.1	19.8
Net services				-1.6	-1.8	-2.8	-1.3	-1.5	-1.6	-1.6	-1.0	-1.6
Net income				-4.5	-3.6	-4.i	-7.0	-6.9	-6.5	-6.1	-5.6	-5.6
Net transfers				0.8	0.7	0.4	0.4	0.3	0.3	0.3	8.2	0.2
Financial account balance ^2/				-4.3	-3.2	1.5	-2.9	-1.2	-0.5	-0.7	-0.8	-0.9
				(Annual change in percent)
Total export volume				6.1	-2.4	3.0	3.5	4.6	3.2	2.3	2.7	2.7
Total import volume				8.5	-2.5	-10.4	10.3	5.1	3.5	2.7	2.6	2.3
Terms of trade				-2.8	1.7	10.1	12.5	-0.1	-1.2	-2.0	-1.8	-1.0
	Total export prices			2.5	-5.6	3.8	19.4	-1.0	-1.0	-0.4	-0.2	0.4
		Copper export prices		0.5	-7.3	15.0	33.9	-1.5	-2.2	-2.1	-1.8	-0.5
	Total import price			5.5	-4.0	-5.6	6.2	-0.9	3.2	1.6	1.6	1.4
Memorandum items
Copper price (WEO; U.S. cents per pound)				296	273	288	377	372	363	356	349	348
Volume of cop per exports (2004=100)				105	104	105	106	111	115	119	123	127

Sources; Central Bank of Chile, Haver Analytics, and IMF staff calculations and projections.

^{^1/}The annual numbers occasionally show a small discrepancy with the authorities published figures, as they are calculated as the sum of the quarterly series sea son ally-adjusted by staff.

^{^2/}Excluding change in reserves.

^{Table 3.}

Chile: Balance of Payments ^1/

(In millions of US$; unless otherwise specified)

						Est.	Proj.
				2018	2019	2020	2021	2022	2023	2024	2025	2026
Current account				-11,623	-10,364	3,438	-15	-887	-1,742	-2,599	-2,922	-3,647
Trade balance of Goods				4,229	2,894	18,438	25,346	26,035	25,568	24,830	24,158	24,483
	Exports			74,706	68,780	73,490	91,352	94,593	96,675	93,943	101,377	104,560
		Copper		35,648	32,604	37,779	51,474	53,287	54,120	54,773	55.577	57,148
		N on- copper		39,058	36.177	35,711	39,878	41,311	42,555	44,170	45,800	47,412
	Imports			70,477	65,887	55,052	66,006	68,563	71,107	74,114	77,219	80,077
Net services				-4,670	-5.104	-4,999	-4,580	-5,043	-5,532	-6,002	-6,276	-6,393
Net income				-13,532	-10,144	-10,963	-21,920	-22,964	-22,798	-22,373	-21,683	-22,613
Net transfers				2,350	1.840	962	1,139	1,085	1,020	946	879	876
Capital account balance				43	672	1	0	0	0	0	0	0
Financial account balance				-12,748	-9,047	3,890	-9,015	-3,887	-1,742	-2,599	-2,922	-3,647
	Foreign direct investment			-6,450	-3,247	3.197	-4,812	-3,373	-3,459	-2,868	-2,771	-4,006
		Abroad by Chilean residents		1,309	9,340	11,725	6,878	6,555	7,161	8,332	8,130	7,411
		In Chile by foreign residents		7,760	12,587	8,528	11,690	9,928	10,620	11,200	10,902	11,418
			Of which, debt instruments	-616	1,997	924	1,098	614	845	1,150	971	983
	Portfolio investment			-2,536	-9,517	-12,304	-5,472	-7,937	-9,260	-9,175	-8,357	-9,135
		Abroad by Chilean residents		2,396	1,667	-5,377	3,844	673	212	-170	1.197	503
		In Chile by foreign residents		4,934	11,184	6,926	9,316	8,610	9,472	9,006	9,554	9,638
			Of which, equities	-1,557	2,968	204	274	253	278	265	281	283
			Of which, debt	6,490	8,217	6,723	9,042	8,357	9,193	3,741	9,273	9,355
	Financial derivatives			832	1,520	2,524	2,523	2,523	2,523	2,523	2,523	2,523
	Other investments			-4,643	2,198	10,474	-1,254	4,900	8,453	6,922	5,683	6,971
		Abroad by Chilean residents		-712	2,974	7,845	7,845	7,845	7,845	7,845	7,845	7,845
		In Chile by foreign residents		3,930	777	-2,629	9,099	2,945	-608	923	2,162	874
Change in reserves assets				1,397	-153	-2,895	9,000	3,000	0	0	0	0
Errors and omissions				230	493	-2,443	0	0	0	0	0	0
Gross official international reserves				6.4	5.7	5.9	8.7	7.6	7.4	7.1	6.3	6.5
	(In months of imports of goods and services)
				(In percent of GDP)
Current account				-3.9	-3.7	1.4	0.0	-0.3	-2.5	-0.7	-8.3	-0 9
Trade balance of Good;				1 4	1.0	7.3	8.1	7.8	7.3	6.8	6.3	6.1
	Exports			25.1	24.6	29.1	29.3	28.5	27.7	27.0	26.4	25.9
		Copper		12.0	11.7	14.9	16.5	16.1	15.1	15.0	14.5	14.2
		Non-copper		13.1	13.0	14.1	12.3	12.4	12.2	12.1	11.9	11.7
	Imports			23.7	23.6	21.8	21.1	20.7	20.4	20.2	28.1	19.8
Net services				-1.6	-1.8	-2.8	-1.3	-1.5	-1.6	-1.6	-1.0	-1.6
Net income				-4.5	-3.6	-4.i	-7.0	-6.9	-6.5	-6.1	-5.6	-5.6
Net transfers				0.8	0.7	0.4	0.4	0.3	0.3	0.3	8.2	0.2
Financial account balance ^2/				-4.3	-3.2	1.5	-2.9	-1.2	-0.5	-0.7	-0.8	-0.9
				(Annual change in percent)
Total export volume				6.1	-2.4	3.0	3.5	4.6	3.2	2.3	2.7	2.7
Total import volume				8.5	-2.5	-10.4	10.3	5.1	3.5	2.7	2.6	2.3
Terms of trade				-2.8	1.7	10.1	12.5	-0.1	-1.2	-2.0	-1.8	-1.0
	Total export prices			2.5	-5.6	3.8	19.4	-1.0	-1.0	-0.4	-0.2	0.4
		Copper export prices		0.5	-7.3	15.0	33.9	-1.5	-2.2	-2.1	-1.8	-0.5
	Total import price			5.5	-4.0	-5.6	6.2	-0.9	3.2	1.6	1.6	1.4
Memorandum items
Copper price (WEO; U.S. cents per pound)				296	273	288	377	372	363	356	349	348
Volume of cop per exports (2004=100)				105	104	105	106	111	115	119	123	127

Sources; Central Bank of Chile, Haver Analytics, and IMF staff calculations and projections.

^{^1/}The annual numbers occasionally show a small discrepancy with the authorities published figures, as they are calculated as the sum of the quarterly series sea son ally-adjusted by staff.

^{^2/}Excluding change in reserves.

^{Table 4.}

Chile: Monetary Survey

(In billions of pesos; unless otherwise specified)

Sources: Central Bank of Chile, Haver, and IMF staff calculations.

^{Table 4.}

Chile: Monetary Survey

(In billions of pesos; unless otherwise specified)

			2014	2015	2016	2017	2018	2019	2020
Central bank
	Net foreign assets		23,937	25,645	26,391	23,332	27,043	29,547	27,222
		Net international reserves	24,557	27,333	27,021	23,983	27,731	30,274	27,881
		Net international reserves (in millions of US$)	40,447	38,543	40,494	38,983	39,861	40,657	39,200
		Other foreign assets, net	-530	-688	-630	-651	-688	-727	-659
	Net domestic assets		-15,754	-17,493	-16,049	-12,226	-15,747	-17,212	3,034
		Net credit to general government	-1,102	-124	-476	-9	-553	-392	327
		Net claims on banks and financial corporations	-5,354	-6,306	-5,028	-3,403	-5,163	-4,599	6,640
		Credit to the private sector	518	406	319	189	47	-33	-31
		Other items (net)	-9,317	-11,459	-10,863	-9,003	-10,077	-12,187	-19,135
	Monetary base		3,183	9,152	10,343	11,106	11,296	12,335	30,256
		Currency	5,371	5,858	6,275	6,528	6,740	7,576	12,180
		Required reserves	2,812	3,294	4,068	4,577	4,556	4,750	18,077
Other depository institutions
	Net foreign assets		-5,035	-6,120	-5,394	-7,237	-10,199	-6,048	1,798
	N et foreign assets (in million s of U SJ)		-8,372	-8,652	-8,083	-11,763	-14,660	-8,1 22	2,528
	Net domestic assets		112,450	126,310	132,992	139,488	156,578	171,157	163,806
		Net credit to general government	890	-532	-256	2,965	3,463	4,629	12,541
		Credit to the private sector	117,553	130,465	137,324	144,061	158,792	174,225	179,836
		Other items (net)	-5,098	-3,623	-4,076	-7,538	-5,677	-7,697	-28,571
	Liabilities to the private sector		107,355	120,190	127,598	132,251	146,379	165,109	165,604
		Demand deposits	20,453	23,562	24,044	27,038	30,116	35,058	56,384
		Quasi-money	85,912	96,628	103,554	105,213	116,263	129,051	109,220
Banking system
	Net foreign assets		18,852	20,526	20,997	16,095	16,844	23,499	29,020
	Net domestic assets		102,555	113,683	120,876	129,252	142,030	152,531	1 58,21 6
		Net credit to general government	-212	-656	-732	2,956	2,910	4,237	12,858
		Credit to the private sector	118,175	130,871	137,643	144,250	158,839	174,192	179,805
		Other items (net)	-15,408	-16,531	-16,035	-17,954	-19,715	-25,898	-34,457
	Liabilities to the private sector		121,408	134,209	141,873	145,347	158,874	175,030	187,236
		Money	25,824	29,420	30,319	33,566	36,856	43,633	68,554
		Quasi-money	95,584	104,789	11 1,554	111,781	122,018	132,397	118,672
Memorandum items
			(Annual percentage change)
	Monetary base		-5.5	11.8	13.0	7.4	1.7	9.2	145.3
	Liabilities to the private sector		9.9	10.5	5,7	2.4	9.3	10.8	6.4
	Credit to the private sector (banking system)		10.2	10.7	52	4.8	10.1	9.7	3.2
			(In percent of GDP)
	Monetary base		5.5	5.7	61	6.2	5.9	6.3	15.1
	Liabilities to the private sector		81.7	84.1	83.7	80.9	83.3	89.6	93.5
	Credit to the private sector (banking system)		79.5	82.0	81 2	80.3	83.3	88.7	89.8

Sources: Central Bank of Chile, Haver, and IMF staff calculations.

^{Table 4.}

Chile: Monetary Survey

(In billions of pesos; unless otherwise specified)

			2014	2015	2016	2017	2018	2019	2020
Central bank
	Net foreign assets		23,937	25,645	26,391	23,332	27,043	29,547	27,222
		Net international reserves	24,557	27,333	27,021	23,983	27,731	30,274	27,881
		Net international reserves (in millions of US$)	40,447	38,543	40,494	38,983	39,861	40,657	39,200
		Other foreign assets, net	-530	-688	-630	-651	-688	-727	-659
	Net domestic assets		-15,754	-17,493	-16,049	-12,226	-15,747	-17,212	3,034
		Net credit to general government	-1,102	-124	-476	-9	-553	-392	327
		Net claims on banks and financial corporations	-5,354	-6,306	-5,028	-3,403	-5,163	-4,599	6,640
		Credit to the private sector	518	406	319	189	47	-33	-31
		Other items (net)	-9,317	-11,459	-10,863	-9,003	-10,077	-12,187	-19,135
	Monetary base		3,183	9,152	10,343	11,106	11,296	12,335	30,256
		Currency	5,371	5,858	6,275	6,528	6,740	7,576	12,180
		Required reserves	2,812	3,294	4,068	4,577	4,556	4,750	18,077
Other depository institutions
	Net foreign assets		-5,035	-6,120	-5,394	-7,237	-10,199	-6,048	1,798
	N et foreign assets (in million s of U SJ)		-8,372	-8,652	-8,083	-11,763	-14,660	-8,1 22	2,528
	Net domestic assets		112,450	126,310	132,992	139,488	156,578	171,157	163,806
		Net credit to general government	890	-532	-256	2,965	3,463	4,629	12,541
		Credit to the private sector	117,553	130,465	137,324	144,061	158,792	174,225	179,836
		Other items (net)	-5,098	-3,623	-4,076	-7,538	-5,677	-7,697	-28,571
	Liabilities to the private sector		107,355	120,190	127,598	132,251	146,379	165,109	165,604
		Demand deposits	20,453	23,562	24,044	27,038	30,116	35,058	56,384
		Quasi-money	85,912	96,628	103,554	105,213	116,263	129,051	109,220
Banking system
	Net foreign assets		18,852	20,526	20,997	16,095	16,844	23,499	29,020
	Net domestic assets		102,555	113,683	120,876	129,252	142,030	152,531	1 58,21 6
		Net credit to general government	-212	-656	-732	2,956	2,910	4,237	12,858
		Credit to the private sector	118,175	130,871	137,643	144,250	158,839	174,192	179,805
		Other items (net)	-15,408	-16,531	-16,035	-17,954	-19,715	-25,898	-34,457
	Liabilities to the private sector		121,408	134,209	141,873	145,347	158,874	175,030	187,236
		Money	25,824	29,420	30,319	33,566	36,856	43,633	68,554
		Quasi-money	95,584	104,789	11 1,554	111,781	122,018	132,397	118,672
Memorandum items
			(Annual percentage change)
	Monetary base		-5.5	11.8	13.0	7.4	1.7	9.2	145.3
	Liabilities to the private sector		9.9	10.5	5,7	2.4	9.3	10.8	6.4
	Credit to the private sector (banking system)		10.2	10.7	52	4.8	10.1	9.7	3.2
			(In percent of GDP)
	Monetary base		5.5	5.7	61	6.2	5.9	6.3	15.1
	Liabilities to the private sector		81.7	84.1	83.7	80.9	83.3	89.6	93.5
	Credit to the private sector (banking system)		79.5	82.0	81 2	80.3	83.3	88.7	89.8

Sources: Central Bank of Chile, Haver, and IMF staff calculations.

^{Table 5.}

Chile: Medium-Term Macroeconomic Framework ^1/

Sources: Central Bank of Chile, Ministry of Finance National Statistics Institute Haver Analytics, and IMF staff calculations and projections.

^{^1/}The annual numbers occasionally show a small discrepancy with the authorities published figures, as they are calculated as the sum of the quarterly series seasonally-adjusted by staff.

^{^2/}Investment is defined as: gross fixed capital formation + changes in inventories.

^{^3/}Contribution to growth.

^{^4/}The output gap used for the structural adjustment calculation is measured as the difference between staff's real GDP and the potential GDP of the committee of experts for years for which it is available and binding. Beyond those years, the output gap is progressively closed over time taking into account staff's assessment of the state of the economy.

^{Table 5.}

Chile: Medium-Term Macroeconomic Framework ^1/

							Est.	Proj.
					2018	2019	2020	2021	2022	2023	2024	2025	2026
National accounts					(Annual percentage change unless otherwise specified)
Real GDP					3.7	1.0	-5.8	6.5	3.7	2.7	2.6	2.5	2.5
	Total domestic demand				4.5	0.9	-9.3	8.7	3.8	2.3	25	2.5	2.4
		Consumption			3.7	0.9	-6.9	9.1	4.2	2.9	2.1	2.4	2.2
			Private		3.3	1.1	-7.7	10.0	4.9	3.2	2.3	2.7	2.6
			Public		3.4	0.0	-3.7	5.6	0.5	13	1.0	0.9	-0.1
		Investment ^2/			7.3	1.0	-17.7	7.3	2.4	2.2	4.4	2.8	3.3
			Fixed		5.1	4.5	-11.5	7.4	4.0	3.5	4.3	1.9	1.4
				Private	6.1	5.2	-11.2	6.0	2.3	5.3	4.6	2.7	1.3
				Public	-2.5	-1.2	-14.3	20.2	17.8	-9.5	2.0	-5.5	-2.6
			Inventories ^3/		0.5	-0.7	-1.4	-0.1	-0.4	-0.3	-0.1	0.1	0.4
	Net exports ^3/				-0.9	0.0	3.5	-1.9	-0.1	-0.1	0.0	0.0	0.1
			Exports		5.3	-2.6	-1.1	1.9	4.6	3.2	2.3	2.7	2.7
			Imports		8.1	-2.3	-12.8	8.7	5.1	3.5	2.7	2.6	2.3
Consumer prices
	End of period				2.1	3.0	3.0	3.0	3.0	3.0	3.0	3.0	3.0
	Consumer prices (average)				2.3	2.3	3.0	3.1	3.0	3.0	3.0	3.0	3.0
Output gap					-0.7	-1.3	-5.6	-1.4	-0.2	0.0	0.0	0.0	0.0
Potential growth					2.6	1.6	-1.5	1.9	2.4	2.5	2.5	2.5	2.5
Nominal GDP					6.2	3.0	1.9	11.1	6.4	5.1	4.9	5.0	5.2
Balance of payments					(In percent of GDP)
Current account					-3.9	-3.7	1.4	0.0	-0.3	-0.5	-0.7	-0.3	-0.9
Trade balance					1.4	1.0	7.3	8.1	7.3	7.3	6.3	6.3	6.1
Financial account balance					-4.3	-3.2	1.5	-2.9	-1.2	-0.5	-0.7	-0.3	-0.9
	Of which, foreign direct investment (net)				-2.2	-1.2	1.3	-1.5	-1.0	-1.0	-0.3	-0.7	-1.0
Change I n reserves assets					0.5	-0.1	-1.1	2.9	0.9	0.0	0.0	0.0	0.0
Errors and omissions					0.1	0.2	-1.0	0.0	0.0	0.0	0.0	0.0	0.0
REER (in percenty/y, + = appreciation)					14	-4.8	-8.2	...	...	...		...	...
	(Annual percentage change)				(Annual percentage change)
Total export volume					6.1	-2.4	3.0	3.5	4.6	3.2	2.3	2.7	2.7
	Of which, copper export volume				5.4	-1.3	1.2	0.7	5.1	3.8	3.4	3.3	3.3
Total import volume					8.5	-2.5	-10.4	10.3	5.1	3.5	2.7	2.6	2.3
Terms of trade					-2.8	-1.7	10.1	12.5	-0.1	-1.2	-2.0	-1.3	-1.0
Total export prices					2.5	-5.6	3.8	19.4	-1.0	-1.0	-0.4	-0.2	0.4
	Copper export price index				0.5	-7.3	15.0	33.9	-1.5	-2.2	-2.1	-1.3	-05
Total import price					5.5	-4.0	-5.6	6.2	-0.9	0.2	1.6	1.6	1.4
External debt					(In percent of GDP)
Gross external debt					61.6	70.6	82.7	72.2	71.2	70.5	69.8	68.5	67.2
	Public				8.3	10.7	13.8	12.8	13.2	13.7	14.1	14.0	13.8
	Private				53.3	59.9	68.9	59.4	58.0	56.8	55.6	54.5	53.4
Gross int. reserves (in billions of U.S. dollars)					39.9	40.7	39.2	48.2	51.2	51.2	51.2	51.2	51.2
Savings and investment
Gross domestic investment					22.1	22.9	19.8	19.5	19.3	19.3	19.8	19.9	20.2
	Public				2.3	2.3	2.0	2.3	2.6	2.3	2.3	2.1	2.1
	Private				19.9	20.7	17.8	17.2	16.7	17.0	17.5	17.8	18.0
National saving					18.1	19.2	21.2	19.4	19.0	18.8	19.1	19.2	19.2
	Public				0.8	-0.4	-5.1	-1.7	-0.3	0.2	0.9	1.4	1.4
	Private				17.4	19.6	26.4	21.1	19.4	18.6	18.1	17.8	17.9
Public sector finance
Central government gross debt					25.6	28.2	32.5	34.6	38.1	40.5	41.6	42.0	41.7
Central government net debt					5.7	8.2	10.9	14.3	17.0	18.8	19.9	20.3	20.6
Central government balance					-1.7	-2.9	-7.3	-4.1	-3.1	-2.2	-1.5	-0.9	-0.9
	Total revenue				22.0	21.7	19.9	23.3	22.8	22.7	23.1	23.1	23.1
	Total expenditure				23.7	24.5	27.2	27.4	25.9	24.9	24.6	24.0	24.0
Central government structural balanced^4/					-1.5	-1.7	-2.6	-6.0	-3.9	-2.9	-1.9	-0.9	-0.9
Employment					(Annual percentage change, unless otherwise specified)
Working age population					2.2	2.2	2.0	1.6	1.3	1.2	1.2	1.2	1.2
Labor force					2.6	2.0	-8.9	6.3	0.5	0.3	0.9	1.0	1.0
Employment					2.2	2.1	-12.3	8.9	1.3	1.3	1.2	1.2	1.1
Unemployment rate (in percent)					7.4	7.2	10.7	8.9	8.2	7.7	7.4	7.2	7.2

Sources: Central Bank of Chile, Ministry of Finance National Statistics Institute Haver Analytics, and IMF staff calculations and projections.

^{^1/}The annual numbers occasionally show a small discrepancy with the authorities published figures, as they are calculated as the sum of the quarterly series seasonally-adjusted by staff.

^{^2/}Investment is defined as: gross fixed capital formation + changes in inventories.

^{^3/}Contribution to growth.

^{Table 5.}

Chile: Medium-Term Macroeconomic Framework ^1/

							Est.	Proj.
					2018	2019	2020	2021	2022	2023	2024	2025	2026
National accounts					(Annual percentage change unless otherwise specified)
Real GDP					3.7	1.0	-5.8	6.5	3.7	2.7	2.6	2.5	2.5
	Total domestic demand				4.5	0.9	-9.3	8.7	3.8	2.3	25	2.5	2.4
		Consumption			3.7	0.9	-6.9	9.1	4.2	2.9	2.1	2.4	2.2
			Private		3.3	1.1	-7.7	10.0	4.9	3.2	2.3	2.7	2.6
			Public		3.4	0.0	-3.7	5.6	0.5	13	1.0	0.9	-0.1
		Investment ^2/			7.3	1.0	-17.7	7.3	2.4	2.2	4.4	2.8	3.3
			Fixed		5.1	4.5	-11.5	7.4	4.0	3.5	4.3	1.9	1.4
				Private	6.1	5.2	-11.2	6.0	2.3	5.3	4.6	2.7	1.3
				Public	-2.5	-1.2	-14.3	20.2	17.8	-9.5	2.0	-5.5	-2.6
			Inventories ^3/		0.5	-0.7	-1.4	-0.1	-0.4	-0.3	-0.1	0.1	0.4
	Net exports ^3/				-0.9	0.0	3.5	-1.9	-0.1	-0.1	0.0	0.0	0.1
			Exports		5.3	-2.6	-1.1	1.9	4.6	3.2	2.3	2.7	2.7
			Imports		8.1	-2.3	-12.8	8.7	5.1	3.5	2.7	2.6	2.3
Consumer prices
	End of period				2.1	3.0	3.0	3.0	3.0	3.0	3.0	3.0	3.0
	Consumer prices (average)				2.3	2.3	3.0	3.1	3.0	3.0	3.0	3.0	3.0
Output gap					-0.7	-1.3	-5.6	-1.4	-0.2	0.0	0.0	0.0	0.0
Potential growth					2.6	1.6	-1.5	1.9	2.4	2.5	2.5	2.5	2.5
Nominal GDP					6.2	3.0	1.9	11.1	6.4	5.1	4.9	5.0	5.2
Balance of payments					(In percent of GDP)
Current account					-3.9	-3.7	1.4	0.0	-0.3	-0.5	-0.7	-0.3	-0.9
Trade balance					1.4	1.0	7.3	8.1	7.3	7.3	6.3	6.3	6.1
Financial account balance					-4.3	-3.2	1.5	-2.9	-1.2	-0.5	-0.7	-0.3	-0.9
	Of which, foreign direct investment (net)				-2.2	-1.2	1.3	-1.5	-1.0	-1.0	-0.3	-0.7	-1.0
Change I n reserves assets					0.5	-0.1	-1.1	2.9	0.9	0.0	0.0	0.0	0.0
Errors and omissions					0.1	0.2	-1.0	0.0	0.0	0.0	0.0	0.0	0.0
REER (in percenty/y, + = appreciation)					14	-4.8	-8.2	...	...	...		...	...
	(Annual percentage change)				(Annual percentage change)
Total export volume					6.1	-2.4	3.0	3.5	4.6	3.2	2.3	2.7	2.7
	Of which, copper export volume				5.4	-1.3	1.2	0.7	5.1	3.8	3.4	3.3	3.3
Total import volume					8.5	-2.5	-10.4	10.3	5.1	3.5	2.7	2.6	2.3
Terms of trade					-2.8	-1.7	10.1	12.5	-0.1	-1.2	-2.0	-1.3	-1.0
Total export prices					2.5	-5.6	3.8	19.4	-1.0	-1.0	-0.4	-0.2	0.4
	Copper export price index				0.5	-7.3	15.0	33.9	-1.5	-2.2	-2.1	-1.3	-05
Total import price					5.5	-4.0	-5.6	6.2	-0.9	0.2	1.6	1.6	1.4
External debt					(In percent of GDP)
Gross external debt					61.6	70.6	82.7	72.2	71.2	70.5	69.8	68.5	67.2
	Public				8.3	10.7	13.8	12.8	13.2	13.7	14.1	14.0	13.8
	Private				53.3	59.9	68.9	59.4	58.0	56.8	55.6	54.5	53.4
Gross int. reserves (in billions of U.S. dollars)					39.9	40.7	39.2	48.2	51.2	51.2	51.2	51.2	51.2
Savings and investment
Gross domestic investment					22.1	22.9	19.8	19.5	19.3	19.3	19.8	19.9	20.2
	Public				2.3	2.3	2.0	2.3	2.6	2.3	2.3	2.1	2.1
	Private				19.9	20.7	17.8	17.2	16.7	17.0	17.5	17.8	18.0
National saving					18.1	19.2	21.2	19.4	19.0	18.8	19.1	19.2	19.2
	Public				0.8	-0.4	-5.1	-1.7	-0.3	0.2	0.9	1.4	1.4
	Private				17.4	19.6	26.4	21.1	19.4	18.6	18.1	17.8	17.9
Public sector finance
Central government gross debt					25.6	28.2	32.5	34.6	38.1	40.5	41.6	42.0	41.7
Central government net debt					5.7	8.2	10.9	14.3	17.0	18.8	19.9	20.3	20.6
Central government balance					-1.7	-2.9	-7.3	-4.1	-3.1	-2.2	-1.5	-0.9	-0.9
	Total revenue				22.0	21.7	19.9	23.3	22.8	22.7	23.1	23.1	23.1
	Total expenditure				23.7	24.5	27.2	27.4	25.9	24.9	24.6	24.0	24.0
Central government structural balanced^4/					-1.5	-1.7	-2.6	-6.0	-3.9	-2.9	-1.9	-0.9	-0.9
Employment					(Annual percentage change, unless otherwise specified)
Working age population					2.2	2.2	2.0	1.6	1.3	1.2	1.2	1.2	1.2
Labor force					2.6	2.0	-8.9	6.3	0.5	0.3	0.9	1.0	1.0
Employment					2.2	2.1	-12.3	8.9	1.3	1.3	1.2	1.2	1.1
Unemployment rate (in percent)					7.4	7.2	10.7	8.9	8.2	7.7	7.4	7.2	7.2

Sources: Central Bank of Chile, Ministry of Finance National Statistics Institute Haver Analytics, and IMF staff calculations and projections.

^{^1/}The annual numbers occasionally show a small discrepancy with the authorities published figures, as they are calculated as the sum of the quarterly series seasonally-adjusted by staff.

^{^2/}Investment is defined as: gross fixed capital formation + changes in inventories.

^{^3/}Contribution to growth.

^{Table 6.}

Chile: Indicators of External Vulnerabilities ^1/

(In percent; unless otherwise specified)

Sources; Central Bank of Chile, Haver Analytics, WEO, and IMF staff calculations.

^{^1/}The annual numbers occasionally show a small discrepancy with the authorities published figures, as they are calculated as the sum of the quarterly series seasonally-adjusted by staff.

^{^2/}Gold valued at end-period market prices.

^{^3/}Includes amortization of medium/long-term debt due during the following year.

^{^4/}Assessing Reserve Adequacy (IMF, 2011 Policy Paper).

^{^5/}Morgan Stanley Capital International Index (Dec/1987 = 100).

^{Table 6.}

Chile: Indicators of External Vulnerabilities ^1/

(In percent; unless otherwise specified)

		2014	2015	2016	2017	2018	2019	2020
Financial indicators
M3 (percent change)		11.1	12.4	8.7	4.8	11.0	10.9	3.1
	Less pension funds’ deposits (annual percentage change)	9.1	13.5	10.1	5.0	12.3	9.7	17.8
Private sector credit to GDP		79.5	82.0	81.2	80.3	83.3	88.7	89.8
90-day central bank promissory note (nominal) interest rate (avg.)		4.0	2.7	3.5	2.6	2.8	3.3	3.4
Share of foreign currency deposits i n total deposits		16.6	15.4	15.2	13.0	12.8	14.9	14.8
Share of foreign currency loans in total credit		13.7	13.9	13.0	11.4	11.0	11.8	11.8
External indicators
Exports of goods, U.S. dollars (annual percentage change)		-2.2	-17.4	-2.1	13.4	8.5	-7.9	6.8
Imports of goods, U.S. dollars (annual percentage change)		-8.2	-14.6	-4.8	10.1	14.7	-6.5	-16.4
Terms of trade (annual percentage change)		-2.1	-3.0	3.9	10.1	-2.8	-1.7	10.1
REER (annual percent change, period average)		-9.3	-1.0	1.8	3.4	1.4	-4.8	-8.2
Exchange rate (pesos per U5. dollar, period average)		570.4	654.1	676.3	648.9	641.2	703.3	792.2
Current account balance (percent of GDP)		-2.0	-2.4	-2.0	-2.3	-3.9	-3.7	1.4
Financial account less reserves accumulation (percent of GDP)		-2.5	-2.2	-1.9	-0.7	-4.3	-3.2	1.5
Gross official reserves (in billions of US. dollars) ^2/		40.4	38.6	405	39.0	39.9	40.7	39.2
Gross official reserves, months of imports of goods and services		5.4	5.6	6.8	6.8	6.4	5.7	5.9
Gross official reserves to M3		15.0	14.9	13.5	11.5	11.9	11.7	10.5
Gross official reserves to short-term external debt ^3/		92.9	110.4	107.9	89.1	109.5	91.5	74.3
Gross official reserves(percent of GDP)		15.5	15.8	16.2	14.1	13.4	14.6	15.5
IMF reserve adequacy metric (percent of GDP) ^4/		14.8	14.7	15.3	15.5	14.7	16.8	18.2
Total external debt (percent of GDP)		58.4	66.0	65.8	65.2	61.6	70.6	82.7
	Of which: External public sector debt	2.5	3.2	4.0	4.6	4.9	5.7	8.4
Total external debt to exports of goods and services		177.4	224.9	234.7	229.5	216.6	252.7	261.9
External interest payments to exports of goods and services		3.9	6.1	5.4	7.1	5.7	5.9	8.1
External amortization payments to exports of goods and services		49.9	57.3	51.7	51.9	42.3	54.5	68.8
Financial market indicators
Stock market index (in U.S. dollars; period average) ^5/		1726	1465	1409	1731	1869	1512	1037
Sovereign long-term foreign currency debt rating (end of period)
	Moody’s	Aa3	Aa3	Aa3	Aa3	A1	A1	A1
	S&P	AA-	AA-	AA-	A+	A+	A+	A+
	Fitch ratings	A+	A+	A+	A	A	A	A-

Sources; Central Bank of Chile, Haver Analytics, WEO, and IMF staff calculations.

^{^1/}The annual numbers occasionally show a small discrepancy with the authorities published figures, as they are calculated as the sum of the quarterly series seasonally-adjusted by staff.

^{^2/}Gold valued at end-period market prices.

^{^3/}Includes amortization of medium/long-term debt due during the following year.

^{^4/}Assessing Reserve Adequacy (IMF, 2011 Policy Paper).

^{^5/}Morgan Stanley Capital International Index (Dec/1987 = 100).

^{Table 6.}

Chile: Indicators of External Vulnerabilities ^1/

(In percent; unless otherwise specified)

		2014	2015	2016	2017	2018	2019	2020
Financial indicators
M3 (percent change)		11.1	12.4	8.7	4.8	11.0	10.9	3.1
	Less pension funds’ deposits (annual percentage change)	9.1	13.5	10.1	5.0	12.3	9.7	17.8
Private sector credit to GDP		79.5	82.0	81.2	80.3	83.3	88.7	89.8
90-day central bank promissory note (nominal) interest rate (avg.)		4.0	2.7	3.5	2.6	2.8	3.3	3.4
Share of foreign currency deposits i n total deposits		16.6	15.4	15.2	13.0	12.8	14.9	14.8
Share of foreign currency loans in total credit		13.7	13.9	13.0	11.4	11.0	11.8	11.8
External indicators
Exports of goods, U.S. dollars (annual percentage change)		-2.2	-17.4	-2.1	13.4	8.5	-7.9	6.8
Imports of goods, U.S. dollars (annual percentage change)		-8.2	-14.6	-4.8	10.1	14.7	-6.5	-16.4
Terms of trade (annual percentage change)		-2.1	-3.0	3.9	10.1	-2.8	-1.7	10.1
REER (annual percent change, period average)		-9.3	-1.0	1.8	3.4	1.4	-4.8	-8.2
Exchange rate (pesos per U5. dollar, period average)		570.4	654.1	676.3	648.9	641.2	703.3	792.2
Current account balance (percent of GDP)		-2.0	-2.4	-2.0	-2.3	-3.9	-3.7	1.4
Financial account less reserves accumulation (percent of GDP)		-2.5	-2.2	-1.9	-0.7	-4.3	-3.2	1.5
Gross official reserves (in billions of US. dollars) ^2/		40.4	38.6	405	39.0	39.9	40.7	39.2
Gross official reserves, months of imports of goods and services		5.4	5.6	6.8	6.8	6.4	5.7	5.9
Gross official reserves to M3		15.0	14.9	13.5	11.5	11.9	11.7	10.5
Gross official reserves to short-term external debt ^3/		92.9	110.4	107.9	89.1	109.5	91.5	74.3
Gross official reserves(percent of GDP)		15.5	15.8	16.2	14.1	13.4	14.6	15.5
IMF reserve adequacy metric (percent of GDP) ^4/		14.8	14.7	15.3	15.5	14.7	16.8	18.2
Total external debt (percent of GDP)		58.4	66.0	65.8	65.2	61.6	70.6	82.7
	Of which: External public sector debt	2.5	3.2	4.0	4.6	4.9	5.7	8.4
Total external debt to exports of goods and services		177.4	224.9	234.7	229.5	216.6	252.7	261.9
External interest payments to exports of goods and services		3.9	6.1	5.4	7.1	5.7	5.9	8.1
External amortization payments to exports of goods and services		49.9	57.3	51.7	51.9	42.3	54.5	68.8
Financial market indicators
Stock market index (in U.S. dollars; period average) ^5/		1726	1465	1409	1731	1869	1512	1037
Sovereign long-term foreign currency debt rating (end of period)
	Moody’s	Aa3	Aa3	Aa3	Aa3	A1	A1	A1
	S&P	AA-	AA-	AA-	A+	A+	A+	A+
	Fitch ratings	A+	A+	A+	A	A	A	A-

Sources; Central Bank of Chile, Haver Analytics, WEO, and IMF staff calculations.

^{^1/}The annual numbers occasionally show a small discrepancy with the authorities published figures, as they are calculated as the sum of the quarterly series seasonally-adjusted by staff.

^{^2/}Gold valued at end-period market prices.

^{^3/}Includes amortization of medium/long-term debt due during the following year.

^{^4/}Assessing Reserve Adequacy (IMF, 2011 Policy Paper).

^{^5/}Morgan Stanley Capital International Index (Dec/1987 = 100).

^{Table 7.}

Chile: Financial Soundness Indicators

(In percent; unless otherwise specified)

Sources: IMF Financial Soundness Indicators, Moody’s Investor Service and IMF staff calculations.

^{^1/}As of October, 2020.

^{Table 7.}

Chile: Financial Soundness Indicators

(In percent; unless otherwise specified)

		2014	2015	2016	2017	2018	2019	2020 ^1/
Total Assets
	Total assets (In billions of Chilean pesos)	180,846	203,609	211,687	220,365	246,266	290,500	319,546
	Percent of GDP	121.7	127.6	124.9	122.7	129.1	147.9	159.6
Capital Adequacy
	Regulatory Capital to Risk-Weighted Assets	13.4	12.6	13.8	13.8	13.3	12.8	14.3
	Regulatory Tier 1 Capital to Risk-Weighted Assets	10.0	9.4	10.9	11.0	10.7	10.3	10.6
	Capital to Assets	8.0	7.6	8.4	8.4	8.4	7.5	5.9
	Credit Risk
	NPLs Net of Provisions to Capital	-2.1	-3.3	-5.2	-4.6	-4.5	-4.3	-9.0
	NPLs to Gross Loans	2.1	1.9	1.8	1.9	1.9	2.1	1.5
Profitability
	Return on Assets	1.5	1.3	1.2	1.3	1.3	1.2	0.5
	Return on Equity	19.3	17.7	13.8	15.4	15.5	15.2	7.3
	Interest Margin to Gross Income	67.8	66.6	66.8	57.1	67.6	67.1	68.2
	Trading Income to Gross Income	10.8	10.6	10.1	6.5	6.7	9.6	9.6
	Non-interest Expenses to Gross Income	47.4	48.6	52.1	51.1	49.3	46.8	54.3
	Liquidity
	Liquid Assets to Total Assets	13.-5	13.8	14.7	15.3	14.2	15.3	19.8
FX and Derivative Risk
	FX Loans to Total Loans	18.4	20.0	18.2	16.6	18.4	18.9	17.5
	FX Liabilities to Total Liabilities	25.5	27.1	25.8	24.0	25.5	26.7	25.1

Sources: IMF Financial Soundness Indicators, Moody’s Investor Service and IMF staff calculations.

^{^1/}As of October, 2020.

^{Table 7.}

Chile: Financial Soundness Indicators

(In percent; unless otherwise specified)

		2014	2015	2016	2017	2018	2019	2020 ^1/
Total Assets
	Total assets (In billions of Chilean pesos)	180,846	203,609	211,687	220,365	246,266	290,500	319,546
	Percent of GDP	121.7	127.6	124.9	122.7	129.1	147.9	159.6
Capital Adequacy
	Regulatory Capital to Risk-Weighted Assets	13.4	12.6	13.8	13.8	13.3	12.8	14.3
	Regulatory Tier 1 Capital to Risk-Weighted Assets	10.0	9.4	10.9	11.0	10.7	10.3	10.6
	Capital to Assets	8.0	7.6	8.4	8.4	8.4	7.5	5.9
	Credit Risk
	NPLs Net of Provisions to Capital	-2.1	-3.3	-5.2	-4.6	-4.5	-4.3	-9.0
	NPLs to Gross Loans	2.1	1.9	1.8	1.9	1.9	2.1	1.5
Profitability
	Return on Assets	1.5	1.3	1.2	1.3	1.3	1.2	0.5
	Return on Equity	19.3	17.7	13.8	15.4	15.5	15.2	7.3
	Interest Margin to Gross Income	67.8	66.6	66.8	57.1	67.6	67.1	68.2
	Trading Income to Gross Income	10.8	10.6	10.1	6.5	6.7	9.6	9.6
	Non-interest Expenses to Gross Income	47.4	48.6	52.1	51.1	49.3	46.8	54.3
	Liquidity
	Liquid Assets to Total Assets	13.-5	13.8	14.7	15.3	14.2	15.3	19.8
FX and Derivative Risk
	FX Loans to Total Loans	18.4	20.0	18.2	16.6	18.4	18.9	17.5
	FX Liabilities to Total Liabilities	25.5	27.1	25.8	24.0	25.5	26.7	25.1

Sources: IMF Financial Soundness Indicators, Moody’s Investor Service and IMF staff calculations.

^{^1/}As of October, 2020.

^{Table 8.}

Chile: Capacity to Repay Indicators ^1/

Sources: Chilean authorities. Finance Department World Economic Outlook, and IMF staff estimates.

^{^1/}Assumes full drawing under the FCL upon approval and materialization of an adverse scenario, even though the authorities intend to treat the arrangement as precautionary.

^{^2/}Based on the rate of charge as of April 15, 2021. Includes surcharges under the system currently in force and service charges.

^{^3/}Staff projections for external debt, GDP, gross international reserves, and exports of goods and services reflect the adverse, and not the baseline, scenario under which the full FCL drawing is assumed.

^{Table 8.}

Chile: Capacity to Repay Indicators ^1/

		2020	2021	2022	2023	2024	2025	2026
Exposure and Repayments (In SDR millions)
	GRA erect to Chile	--	17,443	17,443	17,443	13.032	4,361	--
	(In percent of quota)	--	1,000	1,000	1,000	750	250	--
	Charges due on GRA credit ^2/	--	306	467	467	514	311	31
	Debt service due on GRA credit ^2/	--	306	467	467	4,875	9.033	4,392
Debt and Debt Service Ratios ^3/
	In percent of GDP
	Total external debt	327	37,9	81.3	77.0	74.2	69,5	66,7
	Public external debt	’3.3	23.5	22.1	21.2	19.6	16,0	14,2
	GRA credit to Chile	--	9.3	3.3	7.6	5.4	1,7	0,0
	Total external debt service	24.3	15.7	11.3	10.5	12.0	13,3	11,3
	Public external debt service	1.4	1.2	0.6	0.6	2.2	3.7	1,9
	Debt service due on GRA credit	--	0.2	0.2	0.2	2.0	3,6	1,7
	In percent of Gross International Reserves
	Total external debt	533.1	562.4	527.5	526.9	514.6	506.1	510.2
	Public external debt	39.2	150.0	142.6	145.2	135.9	116.4	109,0
	GRA credit to Chile	--	59.3	53.6	51.8	37.5	12,6	0,0
	In percent of Exports of Goods and Services
	Total external debt service	77.0	50.2	33.0	33.5	39.2	44,3	38,4
	Public external debt service	4.5	3.9	1.9	1.3	7.3	12,2	6,3
	Debt service due on GRA credit	--	0.5	0.7	0.6	6.6	11,9	5,6
	In percent of Total External Debt
	GRA credit to Chile	--	10.5	10.2	9.3	7.3	2,5	0,0
	In percent of Public External Debt
	GRA credit to Chile	--	39.5	37.6	35.7	27.6	10,8	0,0
	Memo Items
	U. S. dollars per SDR (period average)	1.39	1.45	1.46	1.46	1.47	1.47	1.43
	U. S. dollars per SDR (end of period)	1.44	1.45	1.46	1,47	1,47	1.48	1.48
	Oil Price (WEO APSP, US$ per barrel)	41.29	58.52	54.83	52.54	51.31	50.73	50.55

Sources: Chilean authorities. Finance Department World Economic Outlook, and IMF staff estimates.

^{^1/}Assumes full drawing under the FCL upon approval and materialization of an adverse scenario, even though the authorities intend to treat the arrangement as precautionary.

^{^2/}Based on the rate of charge as of April 15, 2021. Includes surcharges under the system currently in force and service charges.

^{Table 8.}

Chile: Capacity to Repay Indicators ^1/

		2020	2021	2022	2023	2024	2025	2026
Exposure and Repayments (In SDR millions)
	GRA erect to Chile	--	17,443	17,443	17,443	13.032	4,361	--
	(In percent of quota)	--	1,000	1,000	1,000	750	250	--
	Charges due on GRA credit ^2/	--	306	467	467	514	311	31
	Debt service due on GRA credit ^2/	--	306	467	467	4,875	9.033	4,392
Debt and Debt Service Ratios ^3/
	In percent of GDP
	Total external debt	327	37,9	81.3	77.0	74.2	69,5	66,7
	Public external debt	’3.3	23.5	22.1	21.2	19.6	16,0	14,2
	GRA credit to Chile	--	9.3	3.3	7.6	5.4	1,7	0,0
	Total external debt service	24.3	15.7	11.3	10.5	12.0	13,3	11,3
	Public external debt service	1.4	1.2	0.6	0.6	2.2	3.7	1,9
	Debt service due on GRA credit	--	0.2	0.2	0.2	2.0	3,6	1,7
	In percent of Gross International Reserves
	Total external debt	533.1	562.4	527.5	526.9	514.6	506.1	510.2
	Public external debt	39.2	150.0	142.6	145.2	135.9	116.4	109,0
	GRA credit to Chile	--	59.3	53.6	51.8	37.5	12,6	0,0
	In percent of Exports of Goods and Services
	Total external debt service	77.0	50.2	33.0	33.5	39.2	44,3	38,4
	Public external debt service	4.5	3.9	1.9	1.3	7.3	12,2	6,3
	Debt service due on GRA credit	--	0.5	0.7	0.6	6.6	11,9	5,6
	In percent of Total External Debt
	GRA credit to Chile	--	10.5	10.2	9.3	7.3	2,5	0,0
	In percent of Public External Debt
	GRA credit to Chile	--	39.5	37.6	35.7	27.6	10,8	0,0
	Memo Items
	U. S. dollars per SDR (period average)	1.39	1.45	1.46	1.46	1.47	1.47	1.43
	U. S. dollars per SDR (end of period)	1.44	1.45	1.46	1,47	1,47	1.48	1.48
	Oil Price (WEO APSP, US$ per barrel)	41.29	58.52	54.83	52.54	51.31	50.73	50.55

Sources: Chilean authorities. Finance Department World Economic Outlook, and IMF staff estimates.

^{^1/}Assumes full drawing under the FCL upon approval and materialization of an adverse scenario, even though the authorities intend to treat the arrangement as precautionary.

^{^2/}Based on the rate of charge as of April 15, 2021. Includes surcharges under the system currently in force and service charges.

^{Table 9.}

Chile: External Debt Sustainability Framework

^{^1/}Derived as[r – g – r(1 + g) + ea(1 + r)]/(1+g+r+gr) times previous period debt stock, with r= nominal effective interest rate on external debt; r = change in domestic GDP deflator in US dollar terms, g = real GDP growth rate e = nominal appreciation (increase in dollar value of domestic currency), and a = share of domestic – currency denominated debt in total external debt.

^{^2/}The contribution from price and exchange rate changes is defined as[-r(1 + g) + ea(1 + r)]/(1+g+r+gr) times previous period debt stock, r increases with an appreciating domestic currency (e> 0) and rising inflation (based on GDP deflator).

^{^3/}For projection, line includes the impact of price and exchange rate changes.

^{^4/}Defined as current account deficit, plus amortization on medium- and long-term debt; plus short-term debt at end of previous period.

^{^5/}The key variables include real GDP growth; nominal interest rate; dollar deflator growth; and both non-interest current account and non-debt inflows in percent of GDP.

^{^6/}Long-run, constant balance that stabilizes the debt ratio assuming that key variables (real GDP growth, nominal interest rate, dollar deflator growth, and non-debt inflows in percent of GDP) remain at their levels of the last projection year.

^{Table 9.}

Chile: External Debt Sustainability Framework

				Actual							Projections
				2016	2017	2018	2019	2020			2021	2022	2023	2024	2025	2026	Debt-stabilizing non-interest current account ^6/
Baseline: External debt
Change in external debt				65.8	65.2	61.6	70.6	82.7			72.3	71.3	70.5	69.8	68.5	67.2	1.6
Identified external debt-creating flows (4+8+9)				-0.1	-0.7	-3.5	9.0	12.1			-10.4	-1.0	-0.7	-0.7	-1.3	-1.3
	Current account deficit, excluding interest payments			0.1	-2.9	2.3	6.8	3.7			-3.2	-1.5	-0.6	-0.6	-0.5	0.0
		Balance of goods and services		0.5	0.3	2.3	2.1	-3.9			-1.5	-0.9	-0.7	-0.4	-0.3	-0.1
			Exports	0.6	1.3	-0.1	-0.8	5.3			6.7	6.3	5.7	5.1	4.7	4.5
			Imports	28.1	28.4	28.5	27.9	31.6			32.5	31.5	30.6	29.8	29.1	28.7
	Net non-debt creating capital inflows (negative)			-27.4	-27.1	-28.6	-28.7	-26.3			-25.8	-25.2	-24.8	-24.6	-24.5	-24.2
	Automatic debt dynamics ^1/			0.0	1.0	2.9	-0.6	-1.7			1.1	0.8	0.7	0.4	0.4	0.7
		Contribution from nominal interest rate		-0.3	-4.2	-2.8	5.4	9.3			-2.8	-1.3	-0.7	-0.6	-0.6	-0.6
		Contribution from real GDP growth		1.5	2.0	1.6	1.6	2.6			1.5	1.2	1.2	1.1	1.0	1.0
		Contribution from price and exchange rate changes ^2/		-1.1	-0.7	-2.3	-0.7	4.6			-4.3	-2.5	-1.8	-1.7	-1.7	-1.6
Residual, incl, change in gross foreign assets (2–3) ^3/				-0.7	-5.5	-2.2	4.4	2.2
External debt-to-exports ratio (in percent)				-0.2	2.2	-5.9	2.1	8.4			-7.2	0.5	-0.1	-0.1	-0.8	-1.3
Grass external financing need (in billions of US dollars) ^4/				234.7	229.5	216.6	252.7	261.9			222.7	226.2	230.8	234.4	235.4	234.6
	n percent of GDP			41.3	47.2	47.5	52.9	51.5			37.7	32.5	34.5	36.5	37.9	39.9
Scenario with key variables at their historical averages ^5/				16.5	17.1	16.0	18.9	20.4	10-Year	10-Year	12.1	9.8	9.9	10.0	9.9	9.9
Key Macroeconomic Assumptions Underlying Baseline											72.3	76.0	79.1	82.3	84.7	86.7	0.4
Real GDP growth (in percent)									Historical Average	Standard Deviation
GDP deflator in US dollars (change in percent)									Historical Average	Standard Deviation
Nominal external interest rate (in percent)				1.7	1.2	3.7	1.0	-5.8	2.1	3.3	6.5	3.7	2.7	2.6	2.5	2.5
Growth of exports (US dollar terms, in percent)				0.9	9.3	3.6	-7.0	-3.8	-0.4	6.5	15.9	2.6	2.4	2.3	2.3	2.5
Growth of imports (US dollar terms, in percent)				2.3	3.4	2.7	2.5	3.3	2.7	0.4	2.3	1.8	1.7	1.6	1.6	1.5
Current account balance, excluding interest payments				-1.8	12.0	7.7	-7.8	2.3	0.1	9.5	26.8	3.2	2.0	2.3	2.5	3.4
Net non-debt creating capital inflows				-4.3	9.3	13.4	-5.7	-17.3	0.6	13.4	21.2	3.8	3.7	4.2	4.1	3.9

^{^3/}For projection, line includes the impact of price and exchange rate changes.

^{^4/}Defined as current account deficit, plus amortization on medium- and long-term debt; plus short-term debt at end of previous period.

^{^5/}The key variables include real GDP growth; nominal interest rate; dollar deflator growth; and both non-interest current account and non-debt inflows in percent of GDP.

^{Table 9.}

Chile: External Debt Sustainability Framework

				Actual							Projections
				2016	2017	2018	2019	2020			2021	2022	2023	2024	2025	2026	Debt-stabilizing non-interest current account ^6/
Baseline: External debt
Change in external debt				65.8	65.2	61.6	70.6	82.7			72.3	71.3	70.5	69.8	68.5	67.2	1.6
Identified external debt-creating flows (4+8+9)				-0.1	-0.7	-3.5	9.0	12.1			-10.4	-1.0	-0.7	-0.7	-1.3	-1.3
	Current account deficit, excluding interest payments			0.1	-2.9	2.3	6.8	3.7			-3.2	-1.5	-0.6	-0.6	-0.5	0.0
		Balance of goods and services		0.5	0.3	2.3	2.1	-3.9			-1.5	-0.9	-0.7	-0.4	-0.3	-0.1
			Exports	0.6	1.3	-0.1	-0.8	5.3			6.7	6.3	5.7	5.1	4.7	4.5
			Imports	28.1	28.4	28.5	27.9	31.6			32.5	31.5	30.6	29.8	29.1	28.7
	Net non-debt creating capital inflows (negative)			-27.4	-27.1	-28.6	-28.7	-26.3			-25.8	-25.2	-24.8	-24.6	-24.5	-24.2
	Automatic debt dynamics ^1/			0.0	1.0	2.9	-0.6	-1.7			1.1	0.8	0.7	0.4	0.4	0.7
		Contribution from nominal interest rate		-0.3	-4.2	-2.8	5.4	9.3			-2.8	-1.3	-0.7	-0.6	-0.6	-0.6
		Contribution from real GDP growth		1.5	2.0	1.6	1.6	2.6			1.5	1.2	1.2	1.1	1.0	1.0
		Contribution from price and exchange rate changes ^2/		-1.1	-0.7	-2.3	-0.7	4.6			-4.3	-2.5	-1.8	-1.7	-1.7	-1.6
Residual, incl, change in gross foreign assets (2–3) ^3/				-0.7	-5.5	-2.2	4.4	2.2
External debt-to-exports ratio (in percent)				-0.2	2.2	-5.9	2.1	8.4			-7.2	0.5	-0.1	-0.1	-0.8	-1.3
Grass external financing need (in billions of US dollars) ^4/				234.7	229.5	216.6	252.7	261.9			222.7	226.2	230.8	234.4	235.4	234.6
	n percent of GDP			41.3	47.2	47.5	52.9	51.5			37.7	32.5	34.5	36.5	37.9	39.9
Scenario with key variables at their historical averages ^5/				16.5	17.1	16.0	18.9	20.4	10-Year	10-Year	12.1	9.8	9.9	10.0	9.9	9.9
Key Macroeconomic Assumptions Underlying Baseline											72.3	76.0	79.1	82.3	84.7	86.7	0.4
Real GDP growth (in percent)									Historical Average	Standard Deviation
GDP deflator in US dollars (change in percent)									Historical Average	Standard Deviation
Nominal external interest rate (in percent)				1.7	1.2	3.7	1.0	-5.8	2.1	3.3	6.5	3.7	2.7	2.6	2.5	2.5
Growth of exports (US dollar terms, in percent)				0.9	9.3	3.6	-7.0	-3.8	-0.4	6.5	15.9	2.6	2.4	2.3	2.3	2.5
Growth of imports (US dollar terms, in percent)				2.3	3.4	2.7	2.5	3.3	2.7	0.4	2.3	1.8	1.7	1.6	1.6	1.5
Current account balance, excluding interest payments				-1.8	12.0	7.7	-7.8	2.3	0.1	9.5	26.8	3.2	2.0	2.3	2.5	3.4
Net non-debt creating capital inflows				-4.3	9.3	13.4	-5.7	-17.3	0.6	13.4	21.2	3.8	3.7	4.2	4.1	3.9

^{^3/}For projection, line includes the impact of price and exchange rate changes.

^{^4/}Defined as current account deficit, plus amortization on medium- and long-term debt; plus short-term debt at end of previous period.

^{^5/}The key variables include real GDP growth; nominal interest rate; dollar deflator growth; and both non-interest current account and non-debt inflows in percent of GDP.

Annex I. Public Debt Sustainability Analysis

Debt in Chile is sustainable with a high probability. The authorities remain committed to a medium-term structural fiscal consolidation, that would provide space for the necessary stimulus in the short run while stabilizing the debt ratio in the medium run. If the structural consolidation is implemented, the debt would still stabilize under plausible shock scenarios. The authorities continually manage state-contingent debts, which are clearly detailed in an annual report. Both the withdrawal of private pensions and the expansion of credit guarantees (FOGAPE) are expected to result in modest fiscal costs in the medium term.

Past reviews indicate that access to FCL helped lower currency volatility and sovereign bond spreads, pointing to lower probability of crisis. IMF (2014), “Review of Flexible Credit Line, the Precautionary and Liquidity Line, and The Rapid Financing Instrument”, IMF Policy Paper; and IMF (2017), “Republic of Poland: Arrangement Under the Flexible Credit Line and Cancellation of the Current Arrangement”, IMF Country Report 17-18.

This facility allows the BCCh to temporarily exchange U.S. Treasury securities with the Federal Reserve for U.S. dollars, eliminating the need to sell the securities in the open market. Use of the facility does not affect the level of gross international reserves, as the securities are subtracted from reserve assets, while deposits in BCCh’s reserve assets increase by the corresponding amount.

Implementation of regulation related to risk weighted assets and conservation buffer will start in Dec 2021, while the one on systemic charge and capital discounts in Dec 2022.

Since 2001, Chile’s fiscal framework has been guided by a structural balance target for the central government. See more details in IMF Country Reports No. 18/311 (particularly Annex III) and 18/312. Modifications to the target do not require Congress approval. General government data offers a similar picture as the central government data because municipalities are not allowed to borrow.

The policy discussion of the fiscal rule draws on the discussion illustrated in International Monetary Fund, Enhancing Chile's Fiscal Framework, 2019.

Central Bank of Chile, Financial Stability Report, November 2020.

Its foreign-currency ratings are A1 for Moody’s, A for S&P, and A- for Fitch.

Adding an additional buffer for Chile’s exposure to copper price volatility gives a ratio of reserves to commodity-augmented ARA metric of 74 percent.

Chile is classified as a mature market economy for reserve assessment purposes in IMF (2015), “Assessing Reserve Adequacy—Specific Proposals” and IMF (2016), “Guidance Note on the Assessment of Reserve Adequacy and Related Considerations”.

Adequate supervision and prudential regulation form the first pillar—see IMF (2016).

In the non-bank part of the financial system, institutional investors (i.e. pension funds) have a positive net foreign asset position.

The agreement was originally signed in 2015, creating a line of up to RMB 22 billion (about US$3 billion), to facilitate direct settlement of trade between Chile and China in case of disruptions in the RMB market. The agreement has never been drawn upon and the resources are not included in Chile’s international reserves.

Dincer, N., B. Eichengreen, and P. Geraats (2019), Transparency of Monetary Policy in the Post-Crisis World, in D.G. Mayes, P.L. Siklos, and J.-E. Sturm (Editors), The Oxford Handbook of the Economics of Central Banking, Oxford University Press.

The CMF’s estimation shows that, based on the information as of December 31, 2019, the effective equity of the banking system will decrease by USD 2.3 billion, or 6.5 percent of the stock, and the risk-weighted assets will decrease by 9 percent, which is equivalent to capital saving US$1.43 billion.

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Chile: Review Under the Flexible Credit Line Arrangement-Press Release; Staff Report; and Statement by the Executive Director for Chile

Author:

International Monetary Fund. Western Hemisphere Dept.

Volume/Issue:: Volume 2021: Issue 092

Publisher:: International Monetary Fund

ISBN:: 9781513572987

ISSN:: 1934-7685

Pages:: 47

DOI:: https://doi.org/10.5089/9781513572987.002

Keywords
Context
Recent Developments
Outlook and Policies
Evolution of Risks and Review of Qualification
Safeguards
Staff Appraisal
Annex I. Public Debt Sustainability Analysis

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^{Figure 1.}

Chile: COVID-19 Developments

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Chile: IMACEC ^1/

(2013 = 100, SA)

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Chile: NEER ^1/

(1/1/2019=100)

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Chile: Headline and Core Inflation

(In percent, yoy)

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^{Figure 2.}

Chile: Financial Comparison with LA5 and Other EMEs ^1/

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^{Figure 3.}

Chile: Resilience to External Financial Shocks

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Chile: Cumulative Total Portfolio Flows in Weeks

(In US$ billions)

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Chile and U.S.: Central Bank Policy Rates

(In percent)

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Chile: Expected Real Interest Rates

(In percent)

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^{Figure 4.}

Chile: Global Risks and Exposures

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Net International Investment Position, 2020

(In percent of GDP)

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^{Figure 5.}

Chile: Economic Activity

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^{Figure 6.}

Chile: External Sector

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^{Figure 7.}

Chile: Financial Sector

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^{Figure 8.}

Chile: FCL Qualification

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^{Figure 9.}

Chile: Reserve Coverage and FCLs in an International Perspective 1/

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Chile: ARA Metric Decomposition and Reserves

(In US$ billions)

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Chile: Reserves Relative to Standard Benchmarks

(Commodity intensive mature markets)

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Gross and Net Debt, 2020

(In percent of GDP)

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Chile: Inflation Expectations at 1 and 2 Years ^1/

(In percent)

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Chile: External Stress Index

Negative if high

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^{Figure 10.}

Chile: External Debt Sustainability Bound Tests ^1/ ^2/

(External debt in percent of GDP)

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^{Figure 11.}

Chile: Poverty and Income Distribution

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^{Figure 1.}

Chile: Public Sector Debt Sustainability Analysis (DSA)—Baseline Scenario

(In percent of GDP unless otherwise indicated)

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^{Figure 2.}

Chile: Composition of Public Debt and Alternative Scenarios

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^{Figure 3.}

Chile: Macro-Fiscal Stress Tests

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^{Figure 4.}

Chile: Risk Assessment

Foresee

^{Table 9.}

Chile: External Debt Sustainability Framework

				Actual							Projections
				2016	2017	2018	2019	2020			2021	2022	2023	2024	2025	2026	Debt-stabilizing non-interest current account ^6/
Baseline: External debt
Change in external debt				65.8	65.2	61.6	70.6	82.7			72.3	71.3	70.5	69.8	68.5	67.2	1.6
Identified external debt-creating flows (4+8+9)				-0.1	-0.7	-3.5	9.0	12.1			-10.4	-1.0	-0.7	-0.7	-1.3	-1.3
	Current account deficit, excluding interest payments			0.1	-2.9	2.3	6.8	3.7			-3.2	-1.5	-0.6	-0.6	-0.5	0.0
		Balance of goods and services		0.5	0.3	2.3	2.1	-3.9			-1.5	-0.9	-0.7	-0.4	-0.3	-0.1
			Exports	0.6	1.3	-0.1	-0.8	5.3			6.7	6.3	5.7	5.1	4.7	4.5
			Imports	28.1	28.4	28.5	27.9	31.6			32.5	31.5	30.6	29.8	29.1	28.7
	Net non-debt creating capital inflows (negative)			-27.4	-27.1	-28.6	-28.7	-26.3			-25.8	-25.2	-24.8	-24.6	-24.5	-24.2
	Automatic debt dynamics ^1/			0.0	1.0	2.9	-0.6	-1.7			1.1	0.8	0.7	0.4	0.4	0.7
		Contribution from nominal interest rate		-0.3	-4.2	-2.8	5.4	9.3			-2.8	-1.3	-0.7	-0.6	-0.6	-0.6
		Contribution from real GDP growth		1.5	2.0	1.6	1.6	2.6			1.5	1.2	1.2	1.1	1.0	1.0
		Contribution from price and exchange rate changes ^2/		-1.1	-0.7	-2.3	-0.7	4.6			-4.3	-2.5	-1.8	-1.7	-1.7	-1.6
Residual, incl, change in gross foreign assets (2–3) ^3/				-0.7	-5.5	-2.2	4.4	2.2
External debt-to-exports ratio (in percent)				-0.2	2.2	-5.9	2.1	8.4			-7.2	0.5	-0.1	-0.1	-0.8	-1.3
Grass external financing need (in billions of US dollars) ^4/				234.7	229.5	216.6	252.7	261.9			222.7	226.2	230.8	234.4	235.4	234.6
	n percent of GDP			41.3	47.2	47.5	52.9	51.5			37.7	32.5	34.5	36.5	37.9	39.9
Scenario with key variables at their historical averages ^5/				16.5	17.1	16.0	18.9	20.4	10-Year	10-Year	12.1	9.8	9.9	10.0	9.9	9.9
Key Macroeconomic Assumptions Underlying Baseline											72.3	76.0	79.1	82.3	84.7	86.7	0.4
Real GDP growth (in percent)									Historical Average	Standard Deviation
GDP deflator in US dollars (change in percent)									Historical Average	Standard Deviation
Nominal external interest rate (in percent)				1.7	1.2	3.7	1.0	-5.8	2.1	3.3	6.5	3.7	2.7	2.6	2.5	2.5
Growth of exports (US dollar terms, in percent)				0.9	9.3	3.6	-7.0	-3.8	-0.4	6.5	15.9	2.6	2.4	2.3	2.3	2.5
Growth of imports (US dollar terms, in percent)				2.3	3.4	2.7	2.5	3.3	2.7	0.4	2.3	1.8	1.7	1.6	1.6	1.5
Current account balance, excluding interest payments				-1.8	12.0	7.7	-7.8	2.3	0.1	9.5	26.8	3.2	2.0	2.3	2.5	3.4
Net non-debt creating capital inflows				-4.3	9.3	13.4	-5.7	-17.3	0.6	13.4	21.2	3.8	3.7	4.2	4.1	3.9

^{^3/}For projection, line includes the impact of price and exchange rate changes.

^{^4/}Defined as current account deficit, plus amortization on medium- and long-term debt; plus short-term debt at end of previous period.

^{^5/}The key variables include real GDP growth; nominal interest rate; dollar deflator growth; and both non-interest current account and non-debt inflows in percent of GDP.

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Abstract

Context

Recent Developments

Outlook and Policies

Evolution of Risks and Review of Qualification

A. Evolution of Risks and Exposures

B. Review of Qualification

C. Exit Strategy

Safeguards

Staff Appraisal

Annex I. Public Debt Sustainability Analysis

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