Ecuador Government Consumption (ann. var. %)

Government Consumption in Ecuador

Economic growth picks up pace in Q4

GDP growth accelerated to 4.3% year on year in the fourth quarter from 2.7% in Q3. The improvement was broad-based, with growth in both domestic demand and exports accelerating.

Domestically, government spending growth more than tripled to 7.6% in Q4 (Q3: +2.1%). Additionally, private consumption—amounting to 65% of GDP—edged up to 3.8% in Q4 (Q3: +3.7% yoy). Household spending growth improved amid softer price pressures and a lower unemployment rate, though slower credit growth and moderating remittances growth capped the expansion. Fixed investment growth increased to 2.5% in Q4 (Q3: +2.2% yoy).

On the external front, the rate of growth in exports of goods and services almost doubled to 6.2% in Q4 (Q3: 3.2% yoy). Improving oil exports during the quarter—up 31.2% year on year—drove the expansion. Growth in imports of goods and services also strengthened in Q4, to 3.0% (Q3: +0.7%), pointing to firming domestic demand.

On a seasonally adjusted quarter-on-quarter basis, economic growth accelerated to 2.4% in Q4 (Q3: +1.7%).

Analysts at the EIU commented on the outlook:

“We will revise our forecast for GDP growth in 2023 upwards, from 1.3%, as the robust fourth quarter result will generate a positive statistical carryover into this year, but we still expect a sharp deceleration from 2022’s 2.9%. Moreover, our forecasts are subject to unusually high uncertainty, as [President] Lasso faces a high risk of leaving office before his term ends. This would weigh heavily on private investment and potentially complicate external financing, provoking macroeconomic turbulence.”