Ecuador: Annual growth continues to decelerate in Q2, economy falls into recession
October 1, 2015
In Q2 2015, GDP grew 1.0% over the same quarter of the previous year, which came in below the revised 3.3% increase registered in Q1 (previously reported: +3.0% year-on-year) and represented the slowest pace of growth since Q1 2010. Q2’s deceleration was driven by moderations on the domestic side of the economy, which countered a rebound in the external sector’s contribution to growth. Falling production and investment in the oil sector, and cuts in government spending stemming from decreased oil export revenues, are the primary reasons behind Ecuador’s slowdown.
Q2’s slowdown mainly reflected a deterioration in domestic demand. Total consumption growth fell from Q1’s 5.2% to 2.4% in Q2. Private consumption growth fell from 5.1% to 1.9%, while growth in government spending decelerated from Q1’s 5.6% to 4.7% in Q2. Fixed investment growth decreased drastically, swinging from a 1.1% expansion in Q1 to a 4.3% contraction in Q2.
Exports of goods and services barely increased in Q2, falling from a 3.5% increase in Q1 to a 0.4% rise. Imports fell sharply from Q1’s 6.2% increase to a 1.2% contraction Q2. As a result, the external sector’s net contribution to overall growth rebounded from minus 0.9 percentage points in Q1 to plus 0.5 percentage points in Q2, the highest reading in five quarters.
In seasonally-adjusted terms, the economy contracted 0.3% over the previous quarter, after decreasing 0.1% in Q1. The two consecutive quarters of contraction have put Ecuador in a technical recession, as low oil prices take their toll on the economy.
Author: Robert Hill, Economist