Ecuador’s economy expanded by 3.3% in the second quarter of this year, driven by a 6.4% surge in government spending, as reported by the Central Bank.
Household consumption also rose by 4.3%. Fixed capital formation went up 3.8%.
World agencies like the Central Bank and World Bank cut growth forecasts for Ecuador. The Central Bank reduced its outlook from 2.5% to 1.5%.
Similarly, the World Bank adjusted its prediction from 3.1% to 2.6%.
Looking ahead, experts expect a 2% inflation rate. This aligns with the Central Bank’s target.
They also foresee an average oil price of $75 per barrel. A 2.0% fiscal deficit and a 1,850-point country risk are expected by December.
On another note, a regional commission upped its growth forecast to 2.3%. This rise in government expenses mainly funded healthcare and education services.
Remittances and consumer loans fueled the uptick in household spending.
Increased spending on machinery and construction caused the rise in fixed capital. Out of 18 industries, 15 showed growth.
Electricity and water supply led with a 10.8% increase. Shrimp fishing and healthcare services followed closely.
The quarter-to-quarter growth rate was 2.5%. Increases in fixed capital, government expenses, exports, and household spending contributed.
Meanwhile, imports rose 6.2% due to machinery and electrical equipment. Exports fell slightly by 0.2%.
The fall in exports was mainly in oil and processed fish. These numbers come amidst political upheavals.
A disruptive move by President Guillermo Lasso in May stirred the waters. Moreover, early general elections were held on August 20.
The country now awaits a second presidential round.
Background Ecuador Economy
The numbers indicate a resilient economy, especially in a politically tumultuous year. Government investment in healthcare and education seems to be paying off.
Yet, the dependency on government spending is noteworthy. A more diversified economy might offer more stability.
Household consumption also grew, suggesting improved consumer confidence. Yet, it’s worth noting this is driven partly by remittances.
The rise in imports may hint at a recovering consumer market but also increases trade deficits.
Lastly, the downward revisions by global institutions indicate caution.
Given the political climate and revisions, keeping an eye on Ecuador’s economic indicators in the coming months is prudent.