In its annual review, the IMF has pointed out that Chile faces favourable perspectives and balanced risks, as a flexible exchange rate has a shock-absorbing role against external unsteadiness.

“In general terms, the country continues to enjoy one of the best economic policies and politics among emerging countries”, claimed the IMF.

The international organization estimates that the growth rate of the Chilean economy will be around 4% this year, while in 2019 it will be around 3.4%.

“A strengthened tax framework or a deeper consolidation would improve credibility even more”, states the IMF in its report.

In addition, the entity pointed out that President Sebastian Piñera seeks to promote economic growth through structural reforms, but a divided Parliament may put a limit to these initiatives.

In terms of monetary policy, the IMF mentioned that “caution is needed” to decide the normalization rhythm of the Monetary Rate Policy (TPM).

The Central Bank surprisingly raised the TPM in October around 0.25 of a percentage point after a long time of having it around 2.5%. Analysts estimate that it will raise it once again in January.

The report states that the increase of the referential interest rate “must be guided using evidence of a convergence of inflation towards the goal supported by wide indicators”.

It also points out that the Chilean labour market “remains lose and underlying inflation is moderate”. Therefore, risks evolution is key to determine the rhythm of a hardening cycle.

The implementation of the reforms agenda promoted by Piñera, with changes in the tax and pension system could improve growth expectations.

“A broader set of reforms would accelerate the transition towards a more advance economy”, said the IMF. But it added that labour flexibility will be key to promote productivity, competitiveness and diversification.