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2007 OECD Economic Surveys: Chile 2007

image of OECD Economic Surveys: Chile 2007

This 2007 edition of OECD's periodic survey of Chile's economy focuses on key challenges being faced including managing the economy after the copper price boom; efficiency in health care, education and housing services; informality; and raising labour force participation of women and youth.

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Assessment and recommendations

Chile remains a strong performer, even in relation to the most successful comparator countries in the OECD area. Activity lost some vigour in 2006, predominantly because of one-off factors, rather than structural weaknesses, but rebounded in earnest in the first half of 2007. Macroeconomic management continues to be exemplary, delivering falling public indebtedness, growth around potential and low, albeit recently rising, inflation. The rules-based policy framework – combining instruments for saving revenue windfalls related to business and copper-price cycles with inflation targeting and exchange-rate flexibility – is serving the economy well in a period of unprecedented strength in the price of copper. As a result, economic activity is now much more resilient to the vagaries of commodity prices than in previous cycles. The authorities intend to build on these achievements with an ambitious structural reform programme, ranging from regulatory matters to a strengthening of social protection, including through much-needed further enhancements to social security. The OECD concurs with the authorities’ view that a combination of sound macroeconomic policies and additional progress in structural reform is essential for raising and maintaining the economy’s growth potential over the longer term so as to achieve a faster reduction in the income gap that still exists between Chile and the OECD area. Sustaining high growth in the future is also important for a further reduction in poverty and can do much to improve Chile’s still very skewed income distribution.

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