1Q26_ Quarterly Outlook Report_Final_EN - Flipbook - Page 104
T H E P LUMB LI N E | A RETU RN TO F I RS T PRI N CI PL ES
A new face at La Moneda Palace has markets and economists expecting a more amenable
political backdrop for growth after a rocky period under President Gabriel Borić (particularly
during his first few years). At the December 14 runoff vote, conservative candidate Kast defeated
“officialist” candidate Jeannette Jara, with Chileans swinging from the left to the right to give the
runner-up of the 2021 vote a “go” at the presidency. Whether the private sector’s optimism about
a Kast presidency becomes an economic reality will be seen once he takes office on March 11, as
he inherits an economy in relatively good shape expanding at a healthy around-potential pace.
Muted business confidence gets a boost from election outcome
index, future econ conditions
100
80
60
40
20
0
2016
2018
Manufacturing
2020
2022
Retail and wholesale
2024
Construction
Source: ICARE, Scotia Wealth Management.
Kast’s first few months should serve as a litmus test for the effectiveness of his mandate and
reveal whether Chile’s economy had been truly operating cautiously under Borić – as reflected in
underperforming investment and hiring trends – or whether some sluggishness was more
structural. In the November general election, Kast’s coalition also fell just shy of a majority in the
Lower House of Congress, which will require that it works with the centrist People’s Party to push
its agenda, although this is more of a wrinkle than a major issue. The coalition, moreover, holds
half of the seats in the Senate, granting it veto rights on legislation. Regardless, markets may not
take well to Congressional lethargy were it to emerge.
As things stand, we expect investment to be a key growth engine for Chile in 2026, with large
infrastructure projects in mining, public infrastructure, and energy leading the charge. In addition
to these major developments, our attention will shift to emerging plans in sectors potentially
more responsive to political cycles, as well as to firms’ hiring intentions. Chilean labour markets
could also use a pick-me-up after hiring growth stalled mid-year. 3Q-4Q25 data on employment
looked firmer after a weak Q2, but it is still too early to call a solid labour market recovery – one
that could hinge on more conservative policies on wage and benefit increases under Kast.
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