A country progresses due to many factors, which vary depending on its stage of development. Economic, social, institutional, natural, geographic, and demographic elements—among others—not only influence but often determine growth.

Productivity drives sustainable economic growth, reduces poverty, and raises living standards. But what exactly does productivity mean? In simple terms, it refers to how efficiently a country uses its capital and labor to produce goods and services. When productivity increases, the same resources generate more value. This, in turn, boosts GDP, raises real wages, and attracts foreign investment.

The latest report from the International Monetary Fund (IMF) revised Chile’s 2024 GDP growth forecast from 2.5% to 2.3% and projects 2025 growth between 2% and 2.5%. According to the IMF, mining and service exports will fuel next year’s growth, while a recovery in domestic demand is expected to become the main economic driver.

Globally, aggregate productivity growth has slowed over the past decade. We see this in declining average labor productivity—output per worker or per hour—and in the weakening of total factor productivity, which measures how efficiently all production inputs are combined.

Why does this slowdown matter? Because it directly affects people’s well-being and creates social tensions, fiscal pressure, and financial instability. Now is the time for Chile to act and reverse the trend. This moment presents a window of opportunity: economic slowdowns and recent shocks can serve as catalysts to correct imbalances; push reforms; and stimulate innovation, laying the foundation for stronger, more sustainable growth. While the task is not easy, Chile can overcome these challenges with aligned goals and the right public policies.

As mentioned earlier, productivity slowdowns differ between developed and emerging economies due to structural factors. In Chile’s case, a production model heavily reliant on commodities, along with limited investment in R&D and human capital quality, plays a key role.

Still, there is good news. Institutions matter greatly, and research shows that Chile has significant room to boost productivity and converge toward developed country levels. The core challenge is to close productivity gaps by investing in education, reallocating resources, and adopting new technologies. Chile must also diversify its economy, adding value to commodities and scaling up renewable energy across all its forms.

Chile holds strong competitive advantages in solar, wind, and green hydrogen energy. In addition, current migration trends present a unique opportunity by raising the marginal productivity of capital and encouraging investment and growth in labor-intensive sectors. This combination of natural resources, technological innovation, and economic diversification—supported by sound public policies and aligned resources—offers a clear path for growth. Chile can create new jobs and become a leader in clean energy production.

Catalina González – Analista de Operaciones

SOURCES

FMI. (2024). Perspectivas de la economía mundial, octubre de 2024: cambios de política y amenazas crecientes.

Banco Central. (2024). NOTAS DE DISCUSIÓN DIVISIÓN POLÍTICA MONETARIA N°6 Desaceleración de la Productividad.