Macroeconomic Forecast Ecuador

BMI View: Inflation came in at 5.53% y-o-y in November in Ecuador which raises upside risks to our 4.5% year-end estimation. We believe inflation has been rising in Ecuador in part because of the government expansive fiscal policies combined with external supply shocks. Indeed, Ecuador has been impacted by elevated food prices which have driven 'food and beverage' inflation to 8.1% y-o-y in November. We are nevertheless happy to sit for the moment on our 3.0% year-end inflation forecast for 2012 on the back of our Commodities team forecast for a moderation of food prices as well as on 2011 basis effects.

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