Ecuador's Economy Enters Recovery Stage Despite ITT Oil Field Closure
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Loading... - Johannes Gray
- 05 Aug 2024
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The Central Bank of Ecuador (BCE) has announced that the country's economy has entered a "recovery stage" despite the closure of the ITT oil field, which will result in the state losing revenue. According to BCE General Manager Guillermo Avellán, several factors will contribute to this recovery, including external financing, increased public investment, and a reduction in arrears.
Positive Factors Contributing to Recovery
Avellán highlighted the following positive factors that will drive Ecuador's economic recovery:
- External financing from multilateral banks to the central government
- Increased public investment in priority sectors such as health, education, and security
- Reduction in arrears, leading to increased deposits in the financial system and a reactivation of credit for household consumption and investment
- Recovery in total exports
The closure of the ITT oil field is already accounted for in the 1% economic growth projection for 2024. The BCE has conducted studies on the impact of the immediate closure of the ITT oil field and has publicly disclosed the results.
Avellán noted that the VAT, while contributing to fiscal adjustment, has had a temporary impact on inflation. However, the inflation rate has decreased since May and June, and the forecasted inflation rate of 2.4% and 3.6% by the end of 2024 is unlikely to be achieved.
Avellán acknowledged that exogenous factors, such as weather problems and natural phenomena, could affect economic growth. The BCE is monitoring 20 industries, including commerce, construction, and accommodation and food services, and is prepared to update its economic growth forecast of 1% by 2024.
While some non-oil export sectors, such as shrimp and bananas, are facing difficulties, others, such as canned fish and cocoa, are performing well. Non-oil exports have grown at a rate of 4.4% until May, and oil exports have also increased due to higher international prices.
The trade balance of goods has reported a surplus of $3,000 million, the highest since the beginning of dollarization for the first five months of the year. This is a result of total exports growing at a rate of 11%, while imports are contracting due to low activity in the first months of the year.
