Academically, Ecuador Is Not In Crisis
President Rafael Correa, his ministers and the general manager of the Central Bank insist that “times are tough,” and that “the Ecuadorian economy is cooling off,” but also that the country has the means to overcome all problems. Correa even stated in an international TV interview that “academically, Ecuador is not in crisis,” and once again blamed dollarization and dollar appreciation for all current evils.
The government expects a 2015 GDP growth rate of 0.4%, probably based on the y/y results of the three first quarters, which show positive y/y rates of 3.3% and 0.7% for Q1 and Q2, and a negative -0.8% for Q3. On the other hand, q/q growth was negative for Q2 and Q3 (-0.6% and -0.4%) while Q1 showed no growth, according to official information.
Unemployment did not rise much by December 2015 (the rate was 5.5% in Q4), but we will see negative effects in Q3 2016, when substantial job cuts in the public sector and in large private companies such as Maresa (in the automotive industry), Indurama (kitchen appliances) and in the banking sector start to register.
Oil exports fell from 126.9 million barrels in 2014 to approximately 121.2 January-November 2015, and the oil price plunged from $87.95/b to $43.43/b, which, despite much lower oil imports, left a dismal oil surplus, of just $84 million.On the other hand, the non-oil deficit fell from $6,852 million to $4,650 million, leaving an overall deficit of the trade sector deficit of $2,028 million. This year poses new challenges for the external sector, since the country will have to reduce or cut many import controls, with the agreement with the European Union still non-operative.
The fiscal deficit for 2015 is questionable, since the government includes oil facilities as part of oil revenues. According to official data, the overall balance would be 4%, but would rise to 6.4% if revenues are adjusted as mentioned. The official oil price in the 2016 budget is $35/b, and the budget includes substantial spending cuts, reducing the deficit to 2.5% of GDP. We believe some projected savings estimates are too optimistic, and expect a deficit of around 4% instead.
On January 19th, opposition leaders met in Cuenca, and raised hopes for a unity that at least 40% of the population is waiting for. However, the presence of Ramiro Gonzalez, a longtime supporter of Correa’s until a recent impasse between them, raised doubts, leaving the Ecuadorian political panorama for the 2017 elections still quite unclear.
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