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Economic growth is projected to gradually strengthen to 2.8% in 2018. The pick-up will be underpinned by improving external demand and, reflecting more accommodative financial conditions, investment. The unemployment rate is projected to stabilise and wage growth to pick up, both of which will lower income disparities and raise consumption. Inflation is projected to increase as the impact of the past currency appreciation fades and aggregate demand strengthens.
The central bank lowered its main policy rate to 2.75% in April 2017. Monetary policy will continue to support economic activity, while higher public spending on education and health will boost growth and inclusiveness. The strengthening of the competition authority, the simplification of export and investment procedures, and measures to expand firm financing will raise productivity and investment. However, the planned gradual fiscal consolidation could weigh on public investment. More needs to be done to tackle labour market inequalities as well as to simplify licencing procedures and streamline regulations.
Specialisation in natural resources has implied high integration in global value chains, but also exposure to commodity price volatility. Reducing skill mismatches, supporting the formalisation of employment, easing labour market adjustments, encouraging private innovative investment through streamlined regulations and direct R&D support, and upgrading infrastructure networks would all strengthen productivity growth and broaden trade prospects, while reducing inequalities.
Economic Survey of Chile (survey page)