Ecuador Economic Outlook
The economy should have expanded at a faster clip in Q2, following a deceleration in year-on-year growth in Q1. Economic activity increased at a considerably faster annual pace, on average, in April-June than in Q1. Meanwhile, in mid-August Fitch Ratings downgraded the country’s rating into junk territory, from “B-” to “CCC+”, on heightened financing risks stemming from a marked deterioration in the public finances amid social turmoil and political uncertainty. In politics, Luisa Gonzalez of former president Correa’s Citizen Revolution Movement won the first round of the presidential elections on 20 August, ahead of Daniel Noboa. While the former advocates higher social spending, the latter focuses on improving the business climate, introducing tax incentives for businesses and job creation. The two candidates will face each other in the 15 October runoff.
Ecuador Inflation
Inflation rose to 2.6% in August from 2.1% in July. Inflation should remain fairly low through Q4 2023, dampened by a dollarized economy, tighter financing conditions and soft domestic activity. However, higher global energy prices will provide some upward pressure. Swings in agricultural prices as a result of the El Niño weather pattern are a key factor to watch.
This chart displays Economic Growth (GDP, annual variation in %) for Ecuador from 2013 to 2022.