Ecuador: Economic growth rises in the second quarter of 2025
Ecuador’s economy expands robustly: Ecuador’s GDP expanded 4.3% on a seasonally adjusted year-on-year basis in Q2, following a 3.4% expansion in the previous quarter. The result was the strongest in eight quarters.
That said, the acceleration was partly due to a base effect created by a sharp GDP shrinkage in Q2 of last year: On a seasonally adjusted quarter-on-quarter basis, the economy shrank 0.1% in Q2, following a 3.5% expansion in the prior quarter.
Domestic demand and exports drive the result: Compared with the previous quarter’s data, figures in Q2 improved for private consumption (+8.7% in annual terms vs +7.1% in Q1), fixed investment (+7.5% vs +6.7% in Q1), exports of goods and services (+7.9% vs +2.7% in Q1) and imports of goods and services (+16.0% vs +14.3% in Q1). Finally, the variation in government consumption was the same as in the prior quarter (+0.4% in Q2 and Q1).
On the external front, exports were likely bolstered by the frontloading of sales ahead of U.S. tariff hikes. On the domestic front, fixed investment seemingly benefited from the election win of President Daniel Noboa in April. Moreover, mild inflation likely supported disposable income, and the end of power cuts maintained business operations stable. On the flipside, government spending growth was probably curtailed by spending controls in line with the IMF recommendations.
Economy to decelerate in H2 2025: Our Consensus is for the economy to have decelerated in Q3, before losing further steam in Q4; U.S. import tariffs plus damage to oil pipelines and weather-related disruptions are set to have weighed on the external sector. On the domestic front, the scaling back of diesel subsidies is set to curb economic activity further. Moreover, high social tensions and fiscal challenges are set to depress investor sentiment and cap government spending.
In 2026, the economy should expand at a softer pace compared to 2025’s projected levels as catch-up growth from 2024’s shrinkage cools.
Panelist insight: Commenting on the outlook, EIU analysts stated:
“Although the pace of growth in the first half of 2025 is sufficient for us to raise our estimate for growth in the year as a whole, it does not mean that we have become more confident in Ecuador’s short-term economic prospects. Instead, the economy probably benefited from a series of helpful events occurring at the same time and from a low base period.”