Ecuador Economic Forecast

After a broad-based acceleration in Q4, GDP growth likely lost momentum year on year in Q1 2023. In January-February, monthly economic activity growth remained subdued but marginally above Q4 2022’s average. Heavy flooding, an earthquake and a landslide halfway through Q1 hit activity, while also forcing state oil company Petroecuador to suspend operations and halt oil exports in late February, likely dampening activity in the oil sector. In addition, lower average credit growth in January–March compared to Q4 points to subdued private spending. In other news, in early May, Credit Suisse announced it had bought Ecuadorean bonds worth USD 1.6 billion in a record debt-for-nature swap. Meanwhile, in politics, on 9 May, the National Assembly voted in favor of continuing with President Lasso’s impeachment trial. He will testify to the plenary and face a vote that could see him ousted from power.

Inflation ebbed further to 2.4% in April (March: 2.8%) on lower food price growth and falling transport costs. In 2023, price pressures should average lower compared to 2022, dampened by weaker domestic demand and higher imported interest rates. The economy’s dollarization will continue to anchor prices. Commodity price swings and supply-chain shocks pose risks.