Chile's 2026 GDP Growth Forecast Slashed to 1.1% by Credicorp Capital Economist

Daniel Velandia, Chief Economist at Credicorp Capital, has significantly lowered Chile's 2026 GDP growth projection from 1.7% to 1.1%. This downward revision is attributed to the economy's sluggish performance in the first half of the year, despite expectations of better growth in the second half. The recent 2.4% growth figure was largely driven by a strong recovery in the mining sector, influenced by factors like the El Teniente accident from the previous year and statistical effects related to business days. While statistical base effects are expected to aid growth going forward, Velandia remains cautious about sustained growth above 2.5% in the latter half of 2026. He anticipates second-half growth exceeding 2%, but primarily due to favorable statistical comparisons rather than an intrinsic improvement in economic activity. The economy contracted by 0.2% in the first semester, making the revised 1.1% annual growth target challenging. Velandia highlighted that a decline of 1.5 to 2 percentage points in the annual growth projection within six months, absent a global crisis, is unusual. Key factors contributing to this slowdown include the substantial impact of rising global fuel prices, exacerbated by the conflict between the United States and Iran, which affects Chile as a major net oil importer. This has reduced household disposable income and consumer confidence. Additionally, increased hiring costs are negatively impacting employment, and structural issues within the mining sector are also a concern. For 2027, Velandia is more optimistic, projecting growth near 3%, which would be favorable given Chile's estimated potential GDP of 2%. His base scenario for monetary policy involves maintaining the interest rate at 4.5% through the end of 2027.