RIO DE JANEIRO, BRAZIL – Ecuador expects to stabilize its debt in 2022 after a decade of constant increase, make it around US$63 billion, and then start reducing it thanks to the measures introduced by the Government of Guillermo Lasso to lower the public deficit and reach fiscal balance in 2025.
“Next year we should be stabilizing because we will still have a central government fiscal deficit of 2.5% of GDP,” said Finance Minister Simón Cueva, in an interview with Efe in which he reviewed the country’s financial situation after the “worst crisis” that Ecuador has experienced in its entire history.
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Because the last two years, he explained, have been “very complicated for the economy, not only in Ecuador, but in many countries of the world”, and “when one looks at the statistics of Ecuadorian history, this is the strongest crisis”.
Even worse than the so-called “Banking Holiday” in 1999, which shook the Ecuadorian economy and caused a massive exodus of Ecuadorian citizens.
The minister attributes the difficulties of the current crisis not only to the covid-19 pandemic, which caused a 7.8% contraction of GDP in 2020 but also to structural factors of the national economy, such as not having reserve funds and not being able to apply “countercyclical measures” to face the shock, as other countries in and outside the region were able to do.
After a massive vaccination of 75% of its target population between March and September, Ecuador has begun to recover in 2021, as shown by private consumption and employment improvement indicators.
Thus, the growth forecast for 2021 revolves around 3.5% of GDP, and it remains to be seen, said the economic head, if all the measures and reforms manage to improve those of 2022, now between 2.55 and 2.80, according to the most “conservative” estimates.
In those forecasts, Cueva counts on a progressive fiscal deficit reduction, from 7% of GDP last year to 4% this 2021 and 2.5% in 2022, to reach the target of “zero by the end of Lasso’s administration” in 2025.