Chile: IMF Backs Kast Agenda, Sees 3% Growth Path

La Moneda, Chile’s presidential palace in Santiago. The IMF this week endorsed President José Antonio Kast’s economic program. Photo: Draceane, via Wikimedia Commons, CC BY-SA 4.0.

An Unusually Warm IMF Verdict

The International Monetary Fund does not often sound enthusiastic about a government’s economic plan. This week, on Chile, it came close.

Bikas Joshi, the Fund’s new Chile mission chief, said growth could near 3% a year over the medium term. That forecast hinges on two things going right at once.

A Very Slow 2026

The immediate picture is far less impressive. The IMF now projects Chile’s economy will grow only between 0.25% and 0.75% this year.

That is a sharp deceleration from earlier in President Kast’s term. The Fund raised its 2026 forecast to 2.4% in April, only to cut it again in May.

Joshi described the current slowdown as temporary rather than structural. He tied it directly to a transitional decline in copper production, not to weakening demand or policy missteps.

Why the IMF Isn’t Worried Yet

Copper prices help explain the Fund’s patience. The metal hit a record above US$14,500 per tonne in early September, up roughly 18% this year alone.

Joshi said Chile should use this favorable stretch to strengthen both fiscal and external reserves. He wants the exchange rate, not new spending, to keep absorbing the shock.

His warning ran alongside the praise. High commodity dependence leaves Chile exposed to price swings, and to rising costs as ore quality declines at older mines.

Cuts, Deregulation and Spending Restraint at Once

Kast’s program combines tax cuts, deregulation and reduced public spending simultaneously. Critics have argued that mixing stimulus with austerity sends contradictory signals to the economy.

The IMF disagreed directly with that criticism. Joshi called the measures “complementary, not opposed,” each aimed at a different part of the economy.

Tax cuts and deregulation, he said, target medium-term competitiveness and private investment. Spending restraint, meanwhile, protects short-term fiscal sustainability while those slower-moving reforms take hold.

Regulatory reform drew the Fund’s clearest praise. Joshi singled out permit-streamlining efforts as the most promising piece of the government’s agenda so far.

The Copper Catch

Nothing here is guaranteed. The 3% medium-term path assumes copper prices hold near current highs, not just for months but for years.

It also assumes Kast’s reform package clears Chile’s Congress largely intact. Neither condition is fully within the government’s control.

Joshi’s own language reflected that uncertainty. He described the 3% figure as achievable “if” both conditions hold, not as a baseline forecast.

What Kast Actually Proposed

The government calls its package the National Reconstruction Plan. It would cut Chile’s corporate tax rate from 27% to 23%, phased in gradually.

It also adds an employment tax credit and strips back permitting procedures for new investment. In May, the IMF called parts of this “somewhat optimistic” and urged cheaper alternatives instead.

This week’s statement reads as a softer tone on the same plan, four months later. The Fund still wants fiscal consolidation, but now frames the package’s pieces as working together.

A Third Data Point in Six Months

This week’s statement is the IMF’s third distinct read on Chile since Kast took office on 11 March. April brought an upgrade, May brought a cut, and September brought qualified encouragement.

Taken together, the sequence shows an institution still calibrating its view of an untested government. It also shows a government whose numbers keep moving with commodity prices beyond its control.

What It Means for Chileans

For ordinary Chileans, the immediate reality is a near-stalled economy. Growth below 1% this year limits new hiring and wage gains regardless of what happens with copper next year.

For investors, the IMF’s endorsement of the policy mix reduces one source of uncertainty. It does not remove the risk that copper prices retreat before the reforms fully take effect.

Foreign residents holding Chilean-peso assets face the same conditional outlook. A favorable currency and rate environment now rests partly on a metal price outside anyone’s direct control.

Frequently Asked Questions

What did the IMF say about Chile’s economy? It projected medium-term growth near 3% a year, while backing President Kast’s tax, spending and deregulation agenda.

Who is Bikas Joshi? The IMF’s newly assigned mission chief for Chile, who delivered this week’s assessment.

Why is 2026 growth so weak? The IMF projects only 0.25% to 0.75% growth this year, which it attributes to a temporary drop in copper output.

What conditions does the 3% forecast depend on? Copper prices staying elevated, and Kast’s reform agenda passing largely as proposed.

What does the IMF want Chile to do with copper revenue? Build up fiscal and external reserves rather than fund permanent new spending.

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