Chile Growth Forecast Halved as the Central Bank Turns on Investment

Chile's central bank has revised its growth forecast for 2026 downwards, citing weaker demand, adverse weather affecting several sectors, and reduced mining production. The previously forecast range of 1.0 to 1.75 percent has been reduced to 0.25 to 0.75 percent. The bank's report also states that fixed capital formation is expected to contract 0.3 percent in 2026, compared to the projected 2.2 percent growth in June.

This shift in forecast is significant, with the midpoint dropping from approximately 1.4 percent to about 0.5 percent. Despite the downgrade, the bank projects growth of 2 to 3 percent in 2027, and 2.25 to 3.25 percent in 2028. President José Antonio Kast, who took office in March, is six months into his term, making this the first full central bank scenario under his leadership.

Chile faces both growth and inflation challenges, with annual inflation reaching 4.1 percent in August, above the 3 percent target. The bank's decision to hold the monetary policy rate at 4.5 percent unanimously during the September meeting is noted as unusual.