Ecuador Exports (G&S, ann. var. %)

GDP growth accelerates in Q3

GDP growth picked up to 3.2% year on year in the third quarter from 1.9% in the second quarter. Stronger government spending and a rebound in exports growth spearheaded the expansion, which was also supported by robust private consumption growth.

Domestically, government spending edged up to a 2.0% increase in Q3 (Q2: +1.8% yoy), reflecting wage growth in the public sector, and increased investment in healthcare and education. In contrast, private consumption growth—amounting to 65% of GDP—fell to 3.8% in Q3 (Q2: +4.8% yoy). Household spending was underpinned by strong credit growth and remittances inflows. Fixed investment growth also moderated to 1.0% in Q3, marking the worst reading since Q1 2021 (Q2: +2.5% yoy).

On the external front, exports of goods and services rebounded and grew 0.1% in Q3 (Q2: -0.8% yoy). Improving oil production during the quarter likely drove the expansion. Conversely, imports of goods and services deteriorated, contracting 0.4% in Q3 (Q2: +8.6% yoy).

Additionally, underlying momentum strengthened: On a seasonally adjusted quarter-on-quarter basis, economic growth accelerated to 1.7% in Q3, following the previous quarter’s 0.1% increase.

In the fourth quarter, the economy likely continued to grow at a healthy pace but slowed, following the robust performance in July through September; the circumstances driving Q3’s growth largely remained stable in Q4. This will likely push annual GDP growth in 2022 above the Central Bank’s previous projection of 2.7%, according to the latest official estimates.

In Q1 2023, weaker remittances amid a deteriorating global outlook and tighter financial conditions will likely be stifling household spending growth. In addition, the one-year moratorium imposed in September 2022 on the extractive sectors will cap investment growth. Nevertheless, robust fiscal stimulus and a freshly approved USD 700 million disbursement from the IMF should prevent a steeper fall in GDP growth in 2023.