Ecuador: GDP expands at fastest pace in over two years
July 1, 2011
In the first quarter, GDP expanded 8.6% over the same period last year, which was above the already robust 7.0% increase tallied in the fourth quarter. The quarterly reading, which was in line with private sector analysts' expectations, represented the fastest growth rate since the third quarter of 2008. The quarterly reading in the first quarter was mainly the result of strong growth in investment and remarkable export growth. Gross fixed investment expanded 16.7% in Q1, following on an equally strong 16.2% in Q4, mainly fuelled by the government's program to bolster public investment, which is supported by the oil windfall. On the other hand, total consumption decelerated from a 9.2% increase in the fourth quarter to a 7.0% expansion in the first quarter. Meanwhile, exports of goods and services accelerated from an 8.3% increase in the fourth quarter to a 10.8% expansion in the first, which marked the fastest growth rate in five years. On the other hand, imports slowed from growth of 16.4% in Q4 to 8.0% in Q1. As a result, the net contribution of the external sector improved from a 4.4 percentage-point detraction in the fourth quarter to a flat reading in the first. At the sector level, the acceleration in the first quarter was broad-based as all the main sectors improved over the previous quarter reflecting, in particular, buoyant conditions in the oil refining sector (Q4: +15.5% year-on-year; Q1: +43.2% yoy). That said, Petroecuador (the country's state-owned oil producer) recently signed a contract with Petrochina to sell 130 million barrels of crude and 18 million barrels of fuel oil over the next 6 years, which should allow the government to raise spending and public investment. A quarter-on-quarter comparison, however, does not corroborate the acceleration seen in the annual figures, as the economy expanded a seasonally adjusted 1.78% over the previous quarter, down from the 2.64% increase observed in the fourth quarter.
Author: Ricardo Aceves, Senior Economist