Mountains in Ecuador

Ecuador GDP Q4 2023

Ecuador: Economy records sharpest contraction since Q1 2021 in Q4

GDP dropped 0.7% year on year in the final quarter of 2023, contrasting the 0.7% expansion tallied in the third quarter. Q4’s reading marked the worst result since Q1 2021. On a seasonally-adjusted quarter-on-quarter basis, GDP contracted 2.4% in Q4, following the previous period’s 1.3% contraction. Q4’s reading marked the largest decrease since Q2 2020. Elevated insecurity, lower oil output and tighter financial conditions likely weighed on activity in the fourth quarter.

Private consumption fell 0.5% in the fourth quarter, which was above the third quarter’s 2.3% contraction. Public consumption growth was 1.0% (Q3: +3.9% yoy). Meanwhile, fixed investment contracted 5.2% in Q4. (Q3: -3.2% yoy). On the external front, exports of goods and services contracted 7.4% in Q4 (Q3: +1.7% yoy). Conversely, imports of goods and services rebounded, growing 16.2% in Q4 (Q3: -3.2% yoy).

While GDP could return to growth in quarter-on-quarter terms in Q1 following two large and successive quarterly declines, economic activity will remain muted due to elevated crime rates, which led to the declaration of a state of emergency in January. An increase in VAT from April will further suppress domestic demand in Q2.

On the outlook for this year as a whole, Oxford Economics’ Mauricio Monge said:

“Ecuador’s GDP growth is expected to slow to 1% in 2024-2025 […]. Domestic demand will remain weak, with private consumption and investment expected to grow marginally. Factors such as the VAT rate increase, prolonged high interest rates in the US, security issues, and electricity shortages will impact household spending and investment. Additionally, the oil ban in the Yasuní from Q4 2024 onward will affect the economy through 2025.”

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