Chile: Overall fiscal deficit ends 2023 at 2.4% of GDP
Metodi Tzanov
Helping finance professionals understand what is going on in Emerging and Frontier Markets
The central government's overall fiscal deficit was 2.4% of GDP in 2023, ending the year marginally above the last Finance Ministry forecast of 2.3% due to an unexpected improvement of the balance in December, according to data published late Wed. by the budget office Dipres. The 12-month rolling deficit was 2.9% of GDP as of the end of November, but it saw a big improvement in December due to a surge in revenues. Though the final deficit is higher in terms of GDP than the latest forecast, it is lower than the budgeted estimate of 2.7%.
Revenues were 22.7% of GDP in 2023, which is above the 20%-22% norm from the pre-pandemic but well below the 26.0% revenue record from 2022. The base of comparison was unusually high due to pandemic-related effects though, and the final figure for revenues as share of GDP matched the estimate given when the budget was built. Still, the government only reached the revenue target due to the overperformance of lithium-related income and despite significant underperformance from tax revenues. Income tax collection was particularly weak.
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Total spending was 25.0% of GDP in 2023 and the budget office highlighted that budget execution was an even 100%. To get there, the share of budget execution in December was the lowest in at least nine years. The government went above the original budget by about 10% on wages and goods and services, and compensated by leaving the execution of capital spending at just 80%.
Overall, the government was able to stay within limits with its budget execution of 2023, though it required a big course correction in December and significant capital spending under execution. The fiscal path outlined by the government is one of consolidation that continues with?a projected deficit of 1.9% of GDP in 2024, which seems doable assuming a normalization of income tax revenues.