© 2023 International Monetary Fund IMF Country Report No. 23/36 CHILE 2022 ARTICLE IV CONSULTATION—PRESS RELEASE; STAFF REPORT; STAFF SUPPLEMENT; AND STATEMENT BY THE EXECUTIVE DIRECTOR FOR CHILE Under Article IV of the IMF’s Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. In the context of the 2022 Article IV consultation with Chile, the following documents have been released and are included in this package: • A Press Release summarizing the views of the Executive Board as expressed during its January 12, 2023 consideration of the staff report that concluded the Article IV consultation with Chile. • The Staff Report prepared by a staff team of the IMF for the Executive Board’s consideration on January 12, 2023, following discussions that ended on October 27, 2022, with the officials of Chile on economic developments and policies. Based on information available at the time of these discussions, the staff report was completed on December 15, 2022. • An Informational Annex prepared by the IMF staff. • A Staff Supplement updating information on recent developments. • A Statement by the Executive Director for Chile. The IMF’s transparency policy allows for the deletion of market-sensitive information and premature disclosure of the authorities’ policy intentions in published staff reports and other documents. Copies of this report are available to the public from International Monetary Fund • Publication Services PO Box 92780 • Washington, D.C. 20090 Telephone: (202) 623-7430 • Fax: (202) 623-7201 E-mail: publications@imf.org Web: http://www.imf.org Price: $18.00 per printed copy International Monetary Fund Washington, D.C. January 2023 PR23/10 IMF Executive Board Concludes 2022 Article IV Consultation with Chile FOR IMMEDIATE RELEASE Washington, DC – January 20, 2023: The Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation1 with Chile. After an impressive recovery from the COVID-19 pandemic, the Chilean economy is undergoing a necessary transition towards sustainable growth amid a challenging external environment. Economic activity is rapidly cooling down, while inflation seems to have peaked in August. The current account deficit remains elevated, as adverse terms of trade have counteracted the ongoing adjustment of domestic demand. Policy implementation remains very strong, geared towards correcting macroeconomic imbalances that built up during the pandemic, while protecting the most vulnerable and advancing structural reforms. The Central Bank of Chile’s monetary policy response has been forceful and fully in line with the inflation targeting framework. The 2022 fiscal position is projected to be markedly stronger than the target in the authorities’ medium-term fiscal consolidation plan, while the 2023 budget envisions higher social spending and public investment within a sustainable medium-term path. GDP growth on a y/y basis is expected to continue to slow in the last quarter of 2022 and recover by the last quarter of 2023. Given monetary tightening and a negative output gap, inflation is projected to converge to target by end-2024. The current account deficit is expected to gradually revert to the historical average of about 3 percent of GDP, supported by the authorities’ adequate structural fiscal consolidation plan and the flexible exchange rate. Downside risks persist, but very strong fundamentals and policies underpin Chile’s resilience. On the external front, risks stem from a possible abrupt global slowdown, sharply tighter global financial conditions, commodity price shocks, or an intensification of spillovers from Russia’s war in Ukraine. Domestic risks stem mostly from high inflation persisting for longer than expected, social discontent over high food and energy prices, or slow progress to meet social demands. The constitutional reform process will continue but uncertainty over possible outcomes has narrowed. Low public debt, a sustainable external position, and very strong policies and institutional policy frameworks continue to support Chile’s resilience and capacity to respond to shocks. The two-year FCL, approved in August, provides additional external buffers on a precautionary basis and substantial insurance against tail risk scenarios. 1 Under Article IV of the IMF's Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country's economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board. 2 Executive Board Assessment2 Executive Directors broadly agreed with the thrust of the staff appraisal. They commended the authorities’ very strong policies geared towards correcting macroeconomic imbalances built up during the pandemic, while protecting