IMF Slashes Chile Growth Forecast to 0.6% as Kast Defends Social Spending Cuts

The Chilean economy is on course for barely any growth in 2026, and President José Antonio Kast's government is responding by defending public-spending reductions. The International Monetary Fund's October World Economic Outlook puts Chile's 2026 GDP growth at 0.6%, down from the 1.8% forecast cited by Chilean reporting in July. That is an outlook for the full year, not a report that GDP has already fallen 0.6%.

Chile's own central bank had already warned of a sharp loss of momentum. It cut its 2026 growth projection in September to a range of 0.25%–0.75%, from 1%–1.75% in June. The bank pointed to weaker household and business spending, deteriorating employment conditions, falling confidence, fuel-price increases and problems in mining, agriculture and fishing. The figures put pressure on any claim that a rapid recovery is already under way.

Two straight negative monthly readings

The August Monthly Index of Economic Activity, or Imacec, fell 1.0% compared with August 2025, after a 1.5% annual decline in July. The seasonally adjusted August index also fell 0.7% from July. Copper mining was a major driver of the weakness: mining output fell 17.4% year on year as lower ore grades, maintenance and bad weather reduced production.

The details matter. Non-mining activity was still up 1.4% from a year earlier, so the economy did not contract uniformly across every industry. The central bank also cites international shocks, particularly the conflict in the Middle East and higher fuel costs. A president who took office in March did not create those global forces or the structural fragility of Chilean mining. But the government is responsible for how it responds when households face slower growth and insecure jobs.

Workers face the risks; Treasury defends the cuts

The IMF's October forecast also put unemployment at 9.5% for 2026 and 9.6% in 2027, compared with 8.5% in 2025, according to La Tercera's report of the Fund's country projections. These are projected annual figures, not a claim that an identical unemployment rate was observed in every month. They point to an economy where job security cannot be taken for granted.

Finance Minister Jorge Quiroz has defended changes to the draft 2027 budget in the name of fiscal order. One high-profile decision is the elimination of funding for the Yo Elijo Mi PC programme, which provided computers to schoolchildren from vulnerable households. The ministry argued the programme performed poorly in evaluation; supporters ask why financially vulnerable pupils should lose material access to technology before a demonstrably better replacement exists.

Quiroz told an October 21 agricultural-sector gathering that welfare states can create fiscal problems if spending expands without limits. Kast has backed the appeal for patience and expects improvements next year. A debate about programme efficiency is legitimate. So is a much harder question: what immediate protection is provided to people losing a public benefit during a period of low growth and weak employment?

Government forecasts point to 2027, not relief today

The administration's own October fiscal presentation lowered its 2026 GDP forecast to 0.7%, while projecting a rebound to 3.3% growth in 2027. The Budget Directorate describes investment recovery and stronger natural-resource activity as drivers of that improvement. It also aims to reduce the structural deficit over several years. Both the 2027 rebound and the fiscal repair are targets and projections, not accomplished outcomes.

This creates the central policy test for the right-wing administration: fiscal consolidation may improve balance-sheet indicators, but workers and students experience the economy through pay, jobs, public services and household costs. Programmes should be assessed transparently, and spending cuts should be measured against their distributional effects rather than defended merely because they reduce an expenditure line.

Chile's central bank is not presenting an instant turnaround, and the IMF is not projecting a vigorous 2026 recovery. The Kast government can make a case for its fiscal choices, but those choices now operate inside an economy that the country's own official data describe as seriously weakened. The question for the public is which costs the government is asking ordinary households to absorb while it waits for next year's projected growth.

Sources and photo credit

The cover is a credited archival photograph; it is not a photo of the October 2026 announcement or events described. Publication date: October 21, 2026.

Banco Central de Chile, September 2026 Monetary Policy Report, GDP projection and weak demand — Read source

Banco Central de Chile, August 2026 Imacec, released October 1 — Read source

La Tercera, October 13, IMF forecast 0.6% and unemployment projections — Read source

Chile's Dirección de Presupuestos, October 6, 2027 budget framework — Read source

El País Chile, October 21, Quiroz fiscal-policy comments — Read source

El País Chile, October 6, ending Yo Elijo Mi PC funding — Read source

Archival official portrait of José Antonio Kast, Government of Chile, Wikimedia Commons, CC BY 3.0 Chile — Read source

Photo licence, CC BY 3.0 Chile — Read source