Wednesday, June 12, 2024

LATIN AMERICA | 29-09-2023 09:22

Chile President Gabriel Boric plans 3.5% spending hike and vows economic revival

Chile's left-wing President Gabriel Boric says he plans to raise public spending by just 3.5Y next year, less than in 2023, as the government struggles to deliver on its key policy proposals.

Chile plans to raise public spending 3.5 percent next year, President Gabriel Boric said late on Thursday, as his administration struggles to move past political tensions and deliver on its key policy proposals.

The 2024 budget will prioritise areas including public security, health care, education and housing, Boric said in a televised speech. Inflation will end this year at about four percent after fiscal responsibility helped stabilise the post-pandemic economy, he said.

“The year 2024 will be marked by the revival of the economy, and this budget seeks to accompany that revival by putting the people first,” Boric said. The government is working so that the Chile’s inhabitants can enjoy “more public security, economic security and social security.”

In his speech, Boric also called on the fragmented Congress to push ahead with talks on his marquee proposals, including an overhaul of Chile’s tax and pension systems. But the timing is challenging as the government must seek consensus following both the revelation of corruption allegations against some coalition members and political bickering surrounding this month’s anniversary of the 1973 military coup.

In the budget, expenditures will rise less than this year as the administration tries to strike a balance between spending to address rising crime and a healthcare crisis, and the need to control above-target inflation. The 2024 budget will be the first to include income from a new mining royalty, Finance Minister Mario Marcel told press earlier this month.

Last year, Chile recorded a budget surplus for the first time in a decade as it slashed spending and reined in much of the pandemic-era cash transfers.

In 2024, health care spending will rise by 8.1 percent, while expenditure on housing jumps 12 percent as the administration advances in its plan to build 260,000 new residencies during Boric’s term in office. Public security spending will rise 5.7 percent, while education outlays increase 4.2 percent, the president said.

The proposal comes as just 26 percent of voters back Boric while 55% disapprove of the president, according to a Data Influye poll published this week. The survey identified crime and the economy as top issues undermining his support. 

Chile’s gross domestic product will contract 0.2 percent this year, the worst performance in South America after Argentina, according to analysts surveyed by Bloomberg. Economic growth is expected to bounce back to 2% in 2024.

by Matthew Malinowski, Bloomberg


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