Investment in Ecuador

Ecuador - Investment

Contraction in GDP softens but remains pronounced in Q3

Economic activity contracted at a softer pace of 8.8% on an annual basis in Q3, on the heels of Q2’s record-breaking GDP plunge of 12.4%, due to the double shock of the Covid-19 pandemic and weak oil prices. Nonetheless, Q3’s result was the second biggest decline since at least the year 2000 and marked the fifth consecutive quarter of contracting output.

Q3’s more moderate decline was largely attributed to the external sector, amid improved but still-downbeat domestic activity. Consumer spending fell at a less pronounced pace of 8.9% in annual terms, softening from Q2’s 11.1% dive, as the easing of pandemic-related restrictions rekindled consumption. Similarly, fixed investment dropped a milder, albeit still marked, 14.8% (Q2: -17.6 yoy), while government spending contracted 7.4% (Q2: -8.9% yoy).

On the external front, exports of goods and services rebounded 0.3% year-on-year, swinging from Q2’s 15.7% collapse, supported by recovering foreign demand. However, imports continued to drop in Q3, falling 13.1%, albeit softening from Q2’s 19.2% contraction.

On a seasonally-adjusted quarter-on-quarter basis, economic activity rebounded solidly, growing 4.5%, after shrinking 10.6% in the prior quarter.

The economy is expected to rebound this year, following 2020’s collapse owing to the dual shock of the pandemic and low oil prices. However, downside risks, particularly the unpredictable course of the pandemic and potentially slow deployment of vaccines, as well as elevated policy uncertainty amid February’s presidential elections, cloud the outlook.

LatinFocus Consensus Forecast panelists project GDP to grow 3.6% in 2021. For 2022, the panel sees GDP expanding 2.2%.