Chile GDP

Economy slips into contraction in the first quarter of 2026

GDP shrinks more than expected in Q1: Chile's GDP declined 0.3% in seasonally adjusted quarter-on-quarter terms in Q1, following 0.5% growth in the prior quarter. Q1’s contraction was the joint sharpest in nearly two years and sharper than the market had expected. On a year-on-year basis, the economy contracted 0.5% in Q1, following a 1.6% expansion in the previous quarter.

Decline driven by falls in fixed investment and exports: Compared to the prior period's data, readings in Q1 worsened for fixed investment (-3.8% on a seasonally adjusted quarter-on-quarter basis vs +0.9% in Q4), exports of goods and services (-4.2% vs +5.5% in Q4) and imports of goods and services (-1.7% vs 0.0% in Q4). In contrast, readings picked up for private consumption (+1.0% vs +0.9% in Q4) and government consumption (+7.2% vs -1.4% in Q4). Q1’s GDP decline was primarily driven by contractions in fixed investment and exports. Investment weakened due to lower spending on machinery and equipment, while exports were likely hampered by a third consecutive fall in copper production—Chile’s largest export and roughly 10% of GDP—amid adverse weather conditions, aging mines and maintenance-related disruptions. However, government spending rebounded, underpinned by stronger healthcare outlays; moreover, private consumption accelerated slightly as the impact of a higher unemployment rate on household incomes was seemingly more than offset by January’s minimum wage hike.

GDP growth to return in Q2 and accelerate thereafter: Looking ahead, our panelists expect economic growth to return on a sequential basis in Q2, though risks remain skewed to the downside due to higher fuel prices from the Iran conflict, still-soft external demand and labor market slack. Weak consumer and business confidence, along with front-loaded fiscal consolidation, will also constrain activity. In the second half of the year, GDP growth should pick up, supported by investment-friendly reforms, an expanding mining and energy project pipeline, and a potential easing of Middle East tensions. Investment and private consumption, the latter underpinned by a healthy labor market, will remain the main drivers of activity.

Panelist insight: On risks to the 2026 outlook, analysts at Emerging Market Watch commented: “The story [of Chile’s economy] has the potential to change for the worse in the coming quarters, as the external oil shock and the new government's efforts to cut spending could lead to a domestic demand contraction. If this domestic demand contraction materializes, it could influence monetary policy toward staying on hold as inflation rises on account of the oil shock.”

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