IMF Urges Chile to Implement Reforms to Boost Slowing Economic Growth

The IMF has called for Chile to implement structural reforms to enhance economic growth, which has slowed significantly over the past decades. With GDP per capita rising yet demographic challenges emerging, reforms could include improved labor participation and investment processes.

On Tuesday, the International Monetary Fund (IMF) highlighted the need for structural reforms in Chile to combat a troubling economic slowdown. The Fund stated that, by improving investment efficiency, boosting labor force participation, and enhancing collaboration in public-private research and development, Chile could see a resurgence in its economic growth.

Chile has experienced a notable decrease in economic growth, dropping from an impressive 6.2% annually in the 1990s to below 2% in the current decade. This decline has ignited discussions about the sustainability of fiscal policies and the viability of social systems, particularly concerning pensions and education financing.

According to the IMF, while Chile’s GDP per capita has increased significantly—from $8,200 in 1990 to an anticipated $26,000 in 2025—challenges loom ahead. Demographic trends indicate that the working-age population will grow at a mere 0.15% annually through 2035. Given these factors, the IMF estimates that Chile’s economic growth could stagnate at around 1.9% per year, largely due to external pressures and demographic shifts.

The IMF remarked, “To address demographic challenges, Chile could stimulate labor participation, for example by improving the access to quality childcare that would enable more women to enter the labor force.” This statement underscores the necessity of enhancing workforce opportunities, especially for women, as a viable strategy for economic advancement.

Previously heralded as one of Latin America’s fastest-growing economies, Chile now confronts issues such as an aging demographic and an unfavorable global growth climate—struggles that other nations at similar economic levels once avoided. The situation calls for urgent measures.

To counteract these challenges, the IMF has put forth a series of recommendations. Among them are the passage of a technology transfer bill, improvements to investment approval processes, increased access to childcare solutions to elevate workforce participation, and effectively utilizing the country’s vital mineral and renewable energy resources to bolster future growth prospects.

In summary, the IMF urges Chile to undertake structural reforms to revitalize its economic growth, which has slipped markedly in recent years. Key recommendations focus on labor participation enhancements, improvements in investment processes, and effective use of resources. Without these changes, Chile’s growth may remain stagnant, hindered by demographic trends and global economic conditions.

Original Source: thesun.my