Chile · Economy

Six weeks after warning that rising debt could cost Chile a notch, Fitch Ratings has left the grade alone. It likes the spending cuts and dislikes the growth numbers.

The doors of Chile’s Finance Ministry at Teatinos 120 in Santiago, in a file photograph. (Photo: Rio Times media library)

The Fitch Chile rating is staying where it was. Fitch Ratings, one of three big agencies grading government debt, affirmed Chile at A- on Friday 18 September 2026.

The outlook is stable, meaning no change is expected soon. The same review, however, cut its forecast for Chilean growth this year by more than half, to 0.7% from 1.6%.

The decision landed on 18 September, Chile’s national holiday. The Finance Ministry quickly claimed it as a vote of confidence in President José Antonio Kast, who took office in March.

Why Fitch kept the grade

The A- grade rests on “a relatively solid sovereign balance sheet,” according to the report quoted by the Santiago daily La Tercera. Chile’s debt ratio, Fitch said, is lower than its peers’.

Fitch also cited “Chile’s solid governance and its track record of credible macroeconomic policies,” built on inflation targeting. Those are the strengths.

The weaknesses have not gone away. Fitch listed per capita income that stays low against peers, heavy dependence on commodities, and relatively weak external debt and liquidity indicators.

Spending cuts win praise

The Kast government is running what Fitch called a fiscal consolidation focused on spending cuts. It follows Chile missing its structural deficit targets in 2024 and 2025.

Real fiscal revenue rose 7.0% year on year through July, driven by a strong jump in mining income. Spending fell 0.7%, largely because the state slashed capital investment.

On that basis, Fitch forecasts the headline fiscal deficit narrowing to 1.8% of GDP in 2026 from 2.7% in 2025. It expects a further decline in 2027 on high copper prices and spending restraint.

Fitch also weighed the government’s flagship reconstruction bill, which it said was expected to be enacted in September. It cuts corporate tax to 23% by 2029 and aims to shorten permitting times by 40%.

Fitch described the bill as a possible first stage of labour, capital-market and permitting reforms. “The government’s strong position in Congress should favour the push for these reforms,” the agency wrote, as quoted by La Tercera.

The debt numbers

Public debt held at 41.7% of GDP in 2025, the first year in two decades without a rise, Fitch said. It credited a stronger peso and a copper-driven rise in nominal GDP.

Fitch expects the ratio to reach 42.8% in 2026 and then stabilise close to 43%. That is about 16 percentage points below the 59% median for countries rated in the A category.

The Palacio de La Moneda, seat of Chile’s presidency, seen from the park in Santiago, in a file photograph. (Photo: Chofaska, via Wikimedia Commons, CC BY-SA 3.0)

The government raised its 2026 bond-issuance ceiling by US$6.2 billion to US$23.6 billion in the second quarter. Fitch said the full amount may not be needed, given better fiscal results since then.

From warning to reassurance

The tone is gentler than six weeks ago. On Wednesday 5 August 2026, Todd Martínez, Fitch’s co-head of Americas sovereign ratings, sounded a note of caution in Santiago.

Debt stood at 43.1% of GDP at the end of June, La Tercera reported, near Chile’s self-imposed 45% ceiling. “If debt keeps rising above 45%, I think it could eventually mean a rating downgrade,” Martínez said.

He told the business daily Diario Financiero he doubted a cut in the structural deficit to 1.5% of GDP within five years. He said it was unclear whether the promised US$6 billion in spending cuts would be permanent or temporary.

The formal review now projects debt stabilising near 43% of GDP, below the ceiling rather than drifting through it. With that path, the Fitch Chile rating kept a stable outlook.

The growth problem

Growth is the weak spot. The economy shrank 0.3% year on year in the first half, Fitch said, after shocks to fishing, farming and mining.

Business confidence also suffered as petroleum prices rose, the agency added. Output at Codelco, the state copper giant, fell 7.8% through July, and unemployment hit a post-pandemic high of 9.5%.

Fitch flagged a strong El Niño weather pattern lasting until January 2027 as a downside risk. It expects a public-investment recovery in the fourth quarter to lift the second half.

Fitch is not the first to cut. On 9 September 2026 Chile’s central bank, which sets interest rates, lowered its 2026 growth range to 0.25%-0.75%, from 1%-1.75% in June.

For 2027, Fitch forecasts growth of 3%, helped by base effects, recovering confidence, high copper prices and investment rising 8%.

What it means

For bondholders and foreign investors, the affirmation eases the downgrade risk that Fitch itself had raised in August. Chile keeps its A- grade, and Martínez had said rising debt already cost it two earlier downgrades.

For the Finance Ministry led by Jorge Quiroz, it is a political win. The ministry said the decision “confirms the course of fiscal consolidation” that the Kast government has pursued since March.

For everyone else, the forecast cut is the harder number. Fitch’s 0.7% forecast for 2026 is less than a quarter of the 3% it expects for 2027.

More: Chile coverage, every day from The Rio Times.

Frequently Asked Questions

What did Fitch decide about Chile?

Fitch Ratings kept its Chile rating for long-term foreign-currency debt at A- with a stable outlook on Friday 18 September 2026. The stable outlook means the agency does not expect to change the grade in the near term. It cited Chile’s lower debt than similarly rated countries, solid governance and credible policy.

Why did Fitch cut Chile’s growth forecast?

Fitch lowered its 2026 forecast to 0.7% from 1.6% after the economy contracted 0.3% in the first half. It pointed to shocks in fishing, farming and mining, weaker business confidence as petroleum prices rose, and lower Codelco output.

Is Chile close to its debt ceiling?

Chile treats debt of 45% of GDP as a prudential ceiling. Fitch put debt at 41.7% of GDP in 2025 and expects 42.8% in 2026, stabilising near 43%. In August a Fitch director warned that debt climbing above 45% could eventually lead to a downgrade.

Who is Jorge Quiroz?

Jorge Quiroz is Chile’s finance minister in the government of President José Antonio Kast. His ministry welcomed the Fitch decision, saying it confirmed the government’s course of fiscal consolidation since March 2026.

Sources: La Tercera on the affirmation and Fitch’s forecasts, Diario Financiero on the debt outlook, BioBioChile on the growth cut, Cooperativa and EFE on the decision, Chile’s Finance Ministry statement, La Tercera on the ministry’s reaction, La Tercera on Fitch’s August warning, Diario Financiero interview with Todd Martínez