Chile Economics: Chile 1Q26 GDP: Softer Beneath the Surface

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Chile Economics: Chile 1Q26 GDP: Softer Beneath the Surface

UpdateMInvestment corrected after a strong run. Gross fixed capital formation still rose

3.20% y-o-y, but slowed sharply from the previous quarter and declined -3.79% q-o-

q sa. The main correction came from machinery and equipment, which rose 10.14% y-

o-y but fell -8.11% q-o-q sa, suggesting payback after the strong capex impulse seen

through 2025. Construction investment remained weak, down -0.95% y-o-y and -

0.53% q-o-q sa. In our view, this does not yet signal a collapse in investment, but it

does suggest that the strong investment-led support that characterized last year is

fading at the margin. Given recent revisions in investment records (CBC), we think the

investment cycle is likely to run further than headline figures suggest.

In terms of policy implications, weaker activity makes hikes harder to justify.

Taken together, the 1Q26 GDP data reinforce the signal from the March activity

prints that the economy is far from being resilient. The divergence between still-

stable consumption and a clearly softer production backdrop remains the central

message. For BCCh, we think this tilts the activity side of the reaction function in a

less hawkish direction and makes it harder to justify hikes in the short term,

particularly if incoming activity data continue to soften. That said, policy will still be

driven primarily by inflation prints and inflation expectations. So while the GDP

release is modestly supportive of an easing bias, a more decisive policy shift will

likely require confirmation from the inflation side.

Exhibit 1: Chile: National Accounts Release 1Q2026 - Demand Side

Source: BCCh, Morgan Stanley Latam Economics

Exhibit 2: Chile: National Accounts Release 1Q2026 - Supply Side