The IMF has urged Chile to implement structural reforms to spur economic growth, which has declined from 6.2% in the 1990s to below 2% in recent years. Key recommendations include enhancing investment efficiency, labor participation, and public-private collaboration in research. Demographic challenges and external factors could limit future growth to around 1.9%.
On Tuesday, the International Monetary Fund (IMF) called on Chile to adopt structural reforms designed to improve the country’s economic growth, which has noticeably slowed in recent years. The IMF emphasized the need to enhance investment efficiency, promote labor force participation, and foster collaboration between public and private sectors in research and development. These proposed changes could potentially stimulate a healthier economic environment, according to the organization.
The slowdown in Chile’s economic growth—increasing from a robust 6.2% annually during the 1990s to under 2% in the 2020s—has sparked persistent discussions surrounding fiscal sustainability and the overall effectiveness of social systems, particularly pensions and educational loans. The decline in growth rates has raised concerns that may challenge longstanding economic models and policies that previously benefited Chilean citizens.
Despite Chile’s GDP per capita rising significantly from $8,200 back in 1990 to an estimated $26,000 in 2025, demographic trends might hinder future economic expansion. The IMF estimates that annual growth could be limited to approximately 1.9% moving forward, primarily due to a stagnant working-age population growth rate of just 0.15% projected through 2035. These figures underscore the critical need for economic adjustments and modernization efforts.
The IMF stated, “To address demographic challenges, Chile could stimulate labor participation, for example by improving access to quality childcare that would enable more women to enter the labor force.” This highlights the potential benefits of targeted social reforms aimed at increasing participation in the workforce, especially among women, which could be pivotal in countering demographic trends.
Historically, Chile was seen as Latin America’s fastest-growing economy. However, it now faces unique challenges that countries at similar income levels didn’t encounter, such as an aging population and an increasingly less favorable environment for global economic growth. These factors complicate the task ahead for policy makers.
Looking ahead, the IMF has laid out several recommendations for Chile to consider. Among these are the passing of a technology transfer bill, streamlining investment approvals, and enhancing access to childcare. The IMF believes these initiatives could bolster labor force participation. Additionally, leveraging the nation’s rich reserves of critical minerals and renewable energy resources could serve as a foundation for driving future economic growth, paving the way for a more sustainable economic landscape overall.
In conclusion, the IMF’s recommendations for Chile emphasize essential reforms aimed at reinvigorating the country’s economic growth. By tackling issues such as workforce participation and investment efficiency, the potential exists to foster a more resilient economy, despite the challenges posed by demographics and global markets. Observers will be watching closely to see how Chile’s policymakers respond to this call for change.
Original Source: thesun.my
