Economic Analysis - Economic Recovery To Slow In 2018 - MAR 2018
BMI View: Ecuador ' s economic recovery will slow in 2018, as an import- driven spike in consumption fades and the government is forced to rein in spending. Structural weaknesses will prevent growth from returning to pre-recession levels as the government of President Lenin Moreno attempts to adjust to a lower oil price environment.
Ecuador's economic recovery remains fragile and we expect the pace of growth will slow in 2018 to 1.0%, from 2.1% in 2017. Public sector spending cuts and the re-implementation of import restrictions will dampen public and private consumption growth respectively over the coming quarters. Additionally, persistent structural weaknesses, including a large informal economy and poor operating environment, will undermine Ecuador's growth potential. As a result we forecast real GDP growth will remain muted in the coming years, averaging 1.8% annually from 2018 to 2022, compared to 4.5% from 2011 to 2015.
Ecuador's economic recovery has been driven by consumption growth and the oil and gas sector... Household consumption in particular has been a key driver, as the lifting of a number of "safeguard" measures, including tariffs and quotas aimed at balancing the country's current account deficit, led to a spike in demand for imported consumer goods ( see 'Strong Import Growth Will Narrow Current Account Surplus', June 28 2017). Additionally, rising global oil prices have boosted exports, providing substantial tailwinds to growth in 2017.
|Muted Growth Ahead|
|Ecuador - Real GDP Growth, % y-o-y|
|e/f = BMI estimate/forecast. Source: BCE, BMI|