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Ecuador Country Risk Report Q4 2018

Ecuador Country Risk Report Q4 2018

Ecuadorian real GDP growth will slow in 2018 and 2019, as President Lenin Moreno pulls back on spending amid an ongoing fiscal crisis.

We expect a gradual acceleration in growth from 2020, as rising oil prices support exports. However, structural weaknesses will continue to present headwinds with growth to remain muted over the medium term.

Moreno will pursue fiscal consolidation and orthodox economic reforms over the coming quarters, a departure from the leftist policies of his predecessor Rafael Correa.

However, austerity measures will weigh on public support for Moreno, limiting his ability to pass legislation.

Amid a dire fiscal situation, a financing agreement with the International Monetary Fund (IMF) is a possibility, which would likely invoke an even more abrupt shift in policy direction.

Ecuador's new economic plan will likely fall short of solving the country's fiscal problems in the near term, as the government's revised fiscal deficit forecast of 5.6% of GDP in 2018 suggests a more dire fiscal situation than previously reported.

We maintain our view that Ecuador's current account will enter into surplus in 2018, buoyed by rising oil exports.

Key Risks

Should oil prices average lower than we anticipate, economic growth, the current account and government revenues would be eroded to an even greater extent.

The Ecuadorian government may be forced into a position to request IMF assistance or restructure its debt should its fiscal position deteriorate further.


Executive Summary
Core Views
Key Risks
Country Risk Summary
Economic Risk Index
Political Risk Index
SWOT
Economic – SWOT Analysis
Political – SWOT Analysis
Economic Outlook
Economic Growth Outlook
Ecuadorian Economy Undermined By Spending Cuts
GDP By Expenditure Outlook
TABLE: PRIVATE CONSUMPTION FORECASTS
TABLE: GOVERNMENT CONSUMPTION FORECASTS
TABLE: FIXED INVESTMENT FORECASTS
TABLE: NET EXPORT FORECASTS
TABLE: GDP GROWTH FORECASTS
External Trade And Investment Outlook
Rising Oil Prices Will Support Current Account
Outlook On External Position
TABLE: CAPITAL AND FINANCIAL ACCOUNT BALANCE
TABLE: TOP FIVE GOODS IMPORTS IN 2017
TABLE: TOP FIVE GOODS EXPORTS IN 2017
Fiscal Policy And Public Debt Outlook
Economic Plan Unlikely To Cure Fiscal Woes
Structural Fiscal Position
TABLE: MAIN REVENUE AND EXPENDITURE CATEGORIES (2015)
TABLE: FISCAL AND PUBLIC DEBT FORECASTS
10-Year Forecast
The Ecuadorian Economy To 2027
Lower Oil Prices And Business Environment To Weigh On Growth
TABLE: LONG-TERM MACROECONOMIC FORECASTS
Ecuador Country Risk Q4 2018ContentsPolitical Outlook
Domestic Politics
Ecuador Shifting Towards Orthodox Economic Policies
TABLE: POLITICAL OVERVIEW
Long-Term Political Outlook
Correa Exit And Spending Cuts Will Weigh On Ruling Party Support
Global Macro Outlook
Pressure On EM Grows, As Do Divergences
TABLE: GLOBAL MACROECONOMIC FORECASTS
TABLE: DEVELOPED STATES – REAL GDP GROWTH, % y-o-y
TABLE: EMERGING MARKETS – REAL GDP GROWTH, % y-o-y
Index Tables
TABLE: ECUADOR – MACROECONOMIC DATA AND FORECASTS

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