{ "title": "Press Release: IMF Executive Board Concludes 2015 Article IV Consultation with Ecuador", "publication": "IMF News, October 21, 2015", "sourceUrl": "https://www.imf.org/en/news/articles/2015/09/14/01/49/pr15475", "canonical": "https://www.imf.org/en/news/articles/2015/09/14/01/49/pr15475", "overlayPath": "/en/news/articles/2015/09/14/01/49/pr15475/index.md", "summary": "Date of conclusion: September 25, 2015.", "publishDate": "2015-10-21", "sections": [ { "heading": "Overview", "content": "- Date of conclusion: September 25, 2015.\n- Growth averaged 4.5 percent over the past decade, supported by positive terms of trade and large public investments.\n- Overall fiscal position of the non-financial public sector (NFPS) deteriorated from balance in 2011 to a deficit of 3.5 percent of GDP in 2012–14, mainly driven by high capital spending.\n- Poverty rate fell from 38 percent in 2006 to 22.5 percent in 2014; GINI coefficient fell from 0.54 in 2006 to 0.47 in 2014.\n- In 2014, growth moderated to 3.8 percent." }, { "heading": "Economic developments and shocks", "content": "- Since Q4 2014 the economy has been hit by external shocks and is slowing down.\n- International oil price decline: about half for the Ecuadorian mix.\n- Real appreciation of the exchange rate: 16 percent year-over-year through June 2015 (eroding competitiveness).\n- Non-oil imports have been declining significantly from April 2015.\n- Inflation is picking up, reflecting changes in transport tariffs as well as in food prices and utilities." }, { "heading": "Policy response and fiscal developments", "content": "- Authorities’ responses: cutting public spending, introducing balance of payment safeguards, and containing minimum wage growth.\n- 2015 fiscal deficit is expected to be contained to the original budget target despite tightened international access to credit.\n- Directors urged development of a contingency plan to address any shortfalls in financing through further cuts in non-priority expenditure while avoiding short-term financing from the central bank.\n- Directors recommended: remove distortionary import surcharges as soon as possible and within the announced timeframe; rebuild fiscal buffers over time; sustain efforts to rationalize expenditure; contain public sector wage growth; continue plan to overhaul fuel subsidies while protecting the poor; improve tax collection; continue pension system reform." }, { "heading": "Financial sector and regulatory recommendations", "content": "- Bank liquidity conditions have tightened, credit growth has slowed, and non-performing loans have risen (albeit from a low level).\n- Directors recommended securing adequate liquidity, improving regulation and supervision, and closely monitoring the financial sector.\n- Specific recommendations:\n - Improve clarity of regulations, strengthen crisis management and supervision, verify the resolution framework.\n - If pressures persist, consider relaxing banks’ reserve requirements.\n - Progressively lift regulatory restrictions on bank activities—especially interest rate caps, penalties on investing abroad, and domestic liquidity requirements.\n - Ensure credibility in the system of electronic money and discontinue directed lending.\n - Strengthen the AML/CFT framework.\n - Undertake a new financial sector assessment (FSAP) given significant changes since the last assessment." }, { "heading": "Outlook and risks", "content": "- 2015: economy projected to contract somewhat; external position deteriorates.\n- Growth prospects revised down going forward due to need to restore competitiveness and lower oil prices’ effects on investment and production.\n- Main risks: availability of external financing; additional softness in oil prices; persistent dollar appreciation; potential domestic financial system pressure; natural disasters.\n- Gross financing needs remain large and international access to credit has tightened." }, { "heading": "Executive Board assessment", "content": "- Executive Directors welcomed resumed on-site Article IV consultations and enhanced collaboration.\n- Commended impressive results in economic and social indicators over the past decade.\n- Noted vulnerability due to heavy dependence on oil revenues and full dollarization, recently exacerbated by sharply declining commodity prices and real exchange rate appreciation.\n- Welcomed authorities’ response to shocks and encouraged further efforts to build policy buffers, preserve financial stability, and strengthen competitiveness.\n- Supported reforms to improve productivity, crowd-in the private sector, attract foreign direct investment, diversify the economy, and promote trade integration.\n- Emphasized containing wage growth and addressing labor market rigidities." }, { "heading": "Selected economic indicators (exact figures from source)", "content": "- Social indicators:\n - Life expectancy at birth (years): 75.6 (2010), 75.9 (2011), 76.2 (2012), 76.5 (2013).\n - Infant mortality (per thousand live births): 20.9 (2010), 20.3 (2011), 19.7 (2012), 19.1 (2013).\n - Adult literacy rate: 91.9 (2010), 91.6 (2011), 93.3 (2012).\n - Poverty rate (total): 32.8 (2010), 28.6 (2011), 27.3 (2012), 25.6 (2013), 22.5 (2014).\n - Unemployment rate: 5.0 (2010), 4.2 (2011), 4.1 (2012), 3.8 (2013).\n- Production and prices (percent change unless otherwise indicated):\n - Real GDP: 3.5 (2010), 7.9 (2011), 5.2 (2012), 4.6 (2013), -0.6 (2014), 0.1 (2015 proj.).\n - Real domestic demand: 8.0 (2010), 7.5 (2011), 6.1 (2012), -3.1 (2013), 0.3 (2014).\n - Consumer price index period average: 3.6 (2010), 4.5 (2011), 5.1 (2012), 2.7 (2013), 2.9 (2014).\n - Consumer price index end-of-period: 3.3 (2010), 5.4 (2011), 3.7 (2012), 2.5 (2013).\n- External sector:\n - Exports: 25.8 (2010), 6.4 (2011), -26.9 (2012), -1.3 (2013).\n - Imports: 37.7 (2010), 18.3 (2011), 5.5 (2012), 6.8 (2013), 1.9 (2014), -19.8 (2015), -1.1 (2016).\n - Terms of trade, national accounts data (deterioration -): 19.0 (2010), 21.8 (2011), 0.2 (2012), 1.1 (2013), -5.4 (2014), -14.6 (2015), 1.0 (2016).\n - Real effective exchange rate (depreciation -): -2.2 (2010), -1.6 (2011), 2.2 (2012), 3.0 (2013).\n- Money and credit:\n - Broad money: 20.6 (2010), 20.5 (2011), 16.0 (2012), 13.0 (2013), 11.4 (2014).\n - Credit to the private sector: 24.4 (2010), 22.6 (2011), 14.7 (2012), 10.5 (2013), 8.7 (2014), 1.4 (2015), 2.0 (2016).\n- Public sector (In percent of GDP):\n - Revenue: 33.3 (2010), 39.3 (2011), 39.5 (2012), 39.4 (2013), 38.8 (2014), 35.4 (2015), 33.7 (2016).\n - Primary expenditure: 34.1 (2010), 38.7 (2011), 39.6 (2012), 43.0 (2013), 43.2 (2014), 39.1 (2015), 35.3 (2016).\n - Primary balance: -0.8 (2010), 0.6 (2011), -0.2 (2012), -3.6 (2013), -4.3 (2014), -3.7 (2015).\n - Overall balance (deficit -): 0.0 (2010), -0.9 (2011), -4.6 (2012), -5.1 (2013).\n- External current account balance: -2.3 (2010), -0.3 (2011), -1.0 (2012), -2.6 (2013), -2.8 (2014).\n- Net international reserves (US$ millions): 2,622 (2010), 2,958 (2011), 2,483 (2012), 4,361 (2013), 3,949 (2014), 3,522 (2015), 3,397 (2016).\n- Debt:\n - Total external debt: 20.4 (2010), 18.7 (2011), 21.5 (2012), 25.4 (2013), 31.9 (2014), 35.9 (2015), 40.4 (2016).\n - Total public debt: 19.4 (2010), 21.7 (2011), 26.0 (2012), 31.3 (2013), 37.4 (2014), 40.4 (2015).\n - Domestic: 6.7 (2010), 5.7 (2011), 8.9 (2012), 12.5 (2013), 12.9 (2014), 12.2 (2015).\n - External: 13.7 (2010), 12.8 (2011), 15.5 (2012), 18.8 (2013), 24.5 (2014), 28.3 (2015).\n - Total public debt, official definition 1/: 19.2 (2010), 18.4 (2011), 21.3 (2012), 24.2 (2013), 29.9 (2014), 34.7 (2015), 38.3 (2016).\n- Saving-investment balance:\n - Gross investment: 28.0 (2010), 28.1 (2011), 27.8 (2012), 28.8 (2013), 24.7 (2014), 23.9 (2015).\n - National saving: 27.6 (2010), 27.7 (2011), 27.5 (2012), 22.1 (2013), 21.1 (2014).\n- Memorandum items:\n - Nominal GDP (US$ millions): 69,555 (2010), 79,277 (2011), 87,623 (2012), 94,473 (2013), 100,543 (2014), 98,925 (2015), 101,698 (2016).\n - GDP per capita (US$): 4,633 (2010), 5,193 (2011), 5,645 (2012), 5,989 (2013).\n\nPress Release No. 15/475 — IMF Communications Department, October 21, 2015.\n\n---\n\n\n References\n\n- Ecuador and the IMF\n- Press Releases\n- PRESS CENTER\n- http://www.imf.org/external/np/sec/misc/qualifiers.htm\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2015/09/14/01/49/pr15475" } ], "bullets": [ "[Markdown version](/en/news/articles/2015/09/14/01/49/pr15475/index.md)", "[Structured JSON version](/en/news/articles/2015/09/14/01/49/pr15475/index.json)", "[Bundle manifest](/en/news/articles/2015/09/14/01/49/pr15475/bundle-manifest.json)", "Published: October 21, 2015", "Date of conclusion: September 25, 2015.", "Growth averaged 4.5 percent over the past decade, supported by positive terms of trade and large public investments.", "Overall fiscal position of the non-financial public sector (NFPS) deteriorated from balance in 2011 to a deficit of 3.5 percent of GDP in 2012–14, mainly driven by high capital spending.", "Poverty rate fell from 38 percent in 2006 to 22.5 percent in 2014; GINI coefficient fell from 0.54 in 2006 to 0.47 in 2014.", "In 2014, growth moderated to 3.8 percent.", "Since Q4 2014 the economy has been hit by external shocks and is slowing down.", "International oil price decline: about half for the Ecuadorian mix.", "Real appreciation of the exchange rate: 16 percent year-over-year through June 2015 (eroding competitiveness).", "Non-oil imports have been declining significantly from April 2015.", "Inflation is picking up, reflecting changes in transport tariffs as well as in food prices and utilities.", "Authorities’ responses: cutting public spending, introducing balance of payment safeguards, and containing minimum wage growth.", "2015 fiscal deficit is expected to be contained to the original budget target despite tightened international access to credit.", "Directors urged development of a contingency plan to address any shortfalls in financing through further cuts in non-priority expenditure while avoiding short-term financing from the central bank.", "Directors recommended: remove distortionary import surcharges as soon as possible and within the announced timeframe; rebuild fiscal buffers over time; sustain efforts to rationalize expenditure; contain public sector wage growth; continue plan to overhaul fuel subsidies while protecting the poor; improve tax collection; continue pension system reform.", "Bank liquidity conditions have tightened, credit growth has slowed, and non-performing loans have risen (albeit from a low level).", "Directors recommended securing adequate liquidity, improving regulation and supervision, and closely monitoring the financial sector.", "Specific recommendations:", "2015: economy projected to contract somewhat; external position deteriorates.", "Growth prospects revised down going forward due to need to restore competitiveness and lower oil prices’ effects on investment and production.", "Main risks: availability of external financing; additional softness in oil prices; persistent dollar appreciation; potential domestic financial system pressure; natural disasters.", "Gross financing needs remain large and international access to credit has tightened.", "Executive Directors welcomed resumed on-site Article IV consultations and enhanced collaboration.", "Commended impressive results in economic and social indicators over the past decade.", "Noted vulnerability due to heavy dependence on oil revenues and full dollarization, recently exacerbated by sharply declining commodity prices and real exchange rate appreciation.", "Welcomed authorities’ response to shocks and encouraged further efforts to build policy buffers, preserve financial stability, and strengthen competitiveness.", "Supported reforms to improve productivity, crowd-in the private sector, attract foreign direct investment, diversify the economy, and promote trade integration.", "Emphasized containing wage growth and addressing labor market rigidities.", "Social indicators:", "Production and prices (percent change unless otherwise indicated):", "External sector:", "Money and credit:", "Public sector (In percent of GDP):", "External current account balance: -2.3 (2010), -0.3 (2011), -1.0 (2012), -2.6 (2013), -2.8 (2014).", "Net international reserves (US$ millions): 2,622 (2010), 2,958 (2011), 2,483 (2012), 4,361 (2013), 3,949 (2014), 3,522 (2015), 3,397 (2016).", "Debt:", "Saving-investment balance:", "Memorandum items:", "[Ecuador and the IMF](http://www.imf.org/external/country/ECU/index.htm)", "[Press Releases](https://www.imf.org/en/news/searchnews)", "[PRESS CENTER](http://presscenter.imf.org/)", "[http://www.imf.org/external/np/sec/misc/qualifiers.htm](https://www.imf.org/external/np/sec/misc/qualifiers.htm)", "[https://www.imf.org/en/home](https://www.imf.org/en/home)" ], "alternates": { "markdown": 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