Nearshore Americas
Chile economy

Chile’s Fiscal Balance Turns Positive, Giving Higher Hopes for the Economy

Chile’s federal fiscal balance hit 1.1% of the country’s GDP in 2022, a decade-high, opening up new avenues for mega infrastructure projects that could stimulate the economy.

The budget balance (the difference between government revenue and spending) turned positive as tax revenues rose 6.3% year-over-year while government spending fell 23.1%.

This is a big change for Chile’s Treasury, which had reported a 7.7% budget deficit for 2021 as demand for copper, the country’s top export, collapsed following the outbreak of the COVID-19 pandemic.

Rising tax revenues could lead to an upgrade in Chile’s sovereign credit rating by international rating agencies like S&P. This would allow the country to borrow from international lenders at much cheaper rates.

Chile is the least indebted country in the world, with a public debt of 37.3% of its GDP. For comparison, the United States has a debt-to-GDP ratio of 129%.

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However, tax revenues might not be as strong in 2023. Part of the tax revenues in 2022 were one-time payments.

Also, there is no guarantee that mineral exports will continue at current rates. In 2022, with lithium mining reaching new highs, revenues from minerals increased by a staggering 503%. Another major contributor to total revenues was a whopping 56% cumulative increase in corporate taxes.

Narayan Ammachchi

News Editor for Nearshore Americas, Narayan Ammachchi is a career journalist with a decade of experience in politics and international business. He works out of his base in the Indian Silicon City of Bangalore.

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