Hermann González, who stepped down two months ago as vice president of the Autonomous Fiscal Council (CFA), considers it debatable whether José Antonio Kast's government should reduce the 2026 structural deficit beyond its commitment, according to Diario Financiero. His argument: Chile's economy is stagnant and at risk of contracting this year.
The CFA is the technical body that monitors whether the government complies with its spending rule. The target for 2026 is a structural deficit (the difference between revenue and spending, excluding fluctuations in the economic cycle and copper prices) of 2.6% of GDP. The Finance Ministry projects ending the year at 2.3%.
"Meeting the target is necessary for the credibility of the fiscal rule, which has taken quite a beating," González told the outlet. He called meeting it after three years of noncompliance "tremendous news." But he added that exceeding it does not seem advisable to him "given the cyclical state of the economy."
Think of it as a family that, in a month with little income, also decides to cut its grocery shopping more than necessary. It puts its finances in order, but it also stops spending at the neighborhood store.
His assessment starts with the seasonally adjusted Imacec, the Central Bank's monthly activity indicator adjusted for calendar effects. According to González, the August figure is practically the same as that of January 2025. In other words, the economy has gone more than a year and a half without advancing, with a risk of another negative Imacec reading in September.
The economist recalled that in late 2025, there was talk of growth close to 3% this year, partly because of optimism about the change in government. He compared that moment with late 2017, before Sebastián Piñera's second term, when the economy did respond with growth of 4% in 2018. This time, that did not happen.
For González, the turning point came with the rise in gasoline prices. The government quickly passed the international increase in oil prices through to domestic prices, and he maintains that this hit household incomes and consumer and business sentiment. He acknowledged that he has not quantified the damage.
The government emphasizes that this decision saved the public treasury between US$ 2,000 million and US$ 3,000 million. González responds that this cost was passed on to the private sector. Since consumption accounts for around two-thirds of GDP, its slowdown weighs directly on growth. For your wallet, that means paying more to fill the tank and having less money for other expenses.
He also described a sequence: in the first quarter, there were supply shocks in fishing, mining and agriculture, and from the second quarter onward, private demand deteriorated and the effects of the public spending adjustment were felt.
For 2026, the government projects growth of 0.7%. González believes it will fall at the lower end of the Central Bank's range, between 0.25% and 0.75%. He warned that some analysts already anticipate a contraction, which would be "terrible news" because the economy would shrink without an international recession to explain it.
The former CFA vice president also warned of fiscal difficulties after 2027, although the available excerpt does not specify what they are. His warning comes as the 2027 Budget is being debated, with the government having to decide how much to adjust in a year that could end with the economy contracting.
