Ecuador’s Economy Shrinks 2% in 2024 Amid Energy Crisis and Oil Production Halt

Ecuador’s economy contracted by 2% in 2024, its sharpest decline since 2020, according to the Central Bank of Ecuador. Household consumption fell 1.3%, government spending dropped 1.2%, and investment plunged 3.8%, offset only marginally by a 1.8% rise in exports.

The downturn stemmed from a historic drought, oil field closures, and escalating security costs, costing the nation $1.916 billion in energy-related losses alone.

A six-decade drought crippled hydroelectric output, triggering 14-hour daily blackouts that stalled industries and drained $12 million hourly from commerce. The government leased thermal generators and slashed public sector hours, but energy deficits persisted through late 2024.

Meanwhile, voters’ 2023 mandate to halt drilling in the Amazon’s Block 43-ITT oil field cut output by 10,000 barrels daily, forfeiting $19 million monthly and risking $12 billion in long-term revenue.

Political turbulence ahead of 2025 elections deterred investment, while homicides hit 44 per 100,000 people, inflating security expenses to 6% of GDP. Tax hikes and austerity measures deepened demand weakness, pushing adequate employment below 34%.

Informal labor rose as manufacturing and services sectors contracted, despite growth in agriculture and real estate. The Central Bank projects a 2.8% rebound in 2025, contingent on stabilizing energy supplies and security.

Analysts warn recovery remains fragile, citing underinvestment in infrastructure and reliance on volatile oil exports. Ecuador’s challenges highlight the economic risks of climate shocks and policy shifts in resource-dependent nations.