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Investing.com -- Fitch Ratings has affirmed Chile’s Long-Term Foreign-Currency Issuer Default Rating at ’A-’ with a Stable Outlook, citing the country’s strong sovereign balance sheet and credible macroeconomic policies.
The rating agency highlighted that Chile’s government debt-to-GDP ratio remains below peer countries, while the nation maintains solid governance and a track record of sound policies centered on inflation targeting and flexible exchange rates.
These strengths are counterbalanced by relatively low per-capita income, high commodity dependence, and weak external debt and liquidity metrics, according to Fitch.
Chile’s economic growth outlook is improving, with Fitch projecting GDP growth of 2.4% in 2025, up from its previous forecast of 2.0%. This improvement reflects large investment projects, strong capital goods imports, and better credit conditions. Growth is expected to moderate to around 2.3% in subsequent years due to anticipated fiscal adjustments.
Despite being a small, open economy exposed to external shocks, Chile has experienced minimal effects from U.S. tariff policies. Fitch estimates an effective tariff rate of approximately 4.8% with the U.S., though the Chilean government forecasts it will be lower. The rating agency believes Chile faces greater risk from a potential downturn in global copper demand than from U.S. tariff policies.
The country’s fiscal performance is improving, with the deficit projected to reach 2.2% of GDP in 2025. Fitch expects this to narrow to 1.6% in 2026 and 1.3% in 2027 as the government implements its fiscal consolidation plan.
Government debt is forecast to rise to 42.3% of GDP in 2025 and 43.4% over the medium term. While this represents a substantial increase from 21.1% a decade ago, it remains below the ’A’ median of 57.3%.
Chile faces presidential and parliamentary elections in November, with a likely runoff in December. The three front-runners include José Antonio Kast and Evelyn Matthei, who favor fiscal conservatism, and Jeannette Jara, who advocates expanded social benefits and higher public investment. Fitch does not anticipate policy changes that would negatively impact Chile’s credit profile.
The Central Bank of Chile cut its main policy rate by 25 basis points in August to 4.75%, which remains above the estimated 4.0% neutral rate. Fitch expects an additional cut to 4.5% in 2025, with inflation projected to converge with the 3% target through 2027.
International reserves are forecast to reach around $47 billion by the end of 2025 and grow to approximately $57 billion by 2027, supported by the central bank’s new accumulation program that aims to increase reserves by $18.5 billion over the next three years.
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