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Ecuador Country Risk Report Q4 2019

Ecuador Country Risk Report Q4 2019

We at Fitch Solutions expect the Ecuadorian economy to contract over the coming quarters, as government austerity measures curtail consumption and un-dermine investment. Policy uncertainty presents an additional risk, as President Lenín Moreno's reform efforts face opposition.

We maintain our forecast for real GDP growth to fall 0.2% in 2019 and expand 0.4% in 2020.

Over the longer term, economic restructuring and an improved investment climate should facilitate increases in productivity and overall growth.

President Lenín Moreno's declining approval ratings will challenge his ability to advance his orthodox economic agenda. Policy uncertainty will likely pose head-winds to investment over the near term, while weakening economic activity will force the administration to focus on measures meant to support employment and household incomes.

Political uncertainty will likely mount as the 2021 general election approaches, where a resurgent right under Jaime Nebot and the Partido Social Cristiano could present a challenge to over a decade of AP rule.

Dollar strength, a downtrend in energy prices and weak domestic demand will keep inflation low in Ecuador. We see no immediate risks to the country's dol-larisation and expect regulatory improvements will support monetary policy credibility.

A USD4.2bn IMF funding package, along with multilateral lending, will shore up Ecuador's near-term financing needs.


Executive Summary
Core Views
Country Risk Summary
Economic Risk Index
Political Risk Index
SWOT
Economic – SWOT Analysis
Political – SWOT Analysis
Economic Outlook
Economic Growth Outlook
Austerity Measures Push Ecuador Into Recession
GDP By Expenditure Outlook
TABLE: GDP GROWTH FORECASTS
TABLE: PRIVATE CONSUMPTION FORECASTS
TABLE: GOVERNMENT CONSUMPTION FORECASTS
TABLE: FIXED INVESTMENT FORECASTS
TABLE: NET EXPORT FORECASTS
Outlook On External Position
TABLE: TOP FIVE GOODS IMPORTS IN 2018
TABLE: TOP FIVE GOODS EXPORTS IN 2018
TABLE: CAPITAL & FINANCIAL ACCOUNT BALANCE
TABLE: CURRENT ACCOUNT BALANCE FORECASTS
Structural Fiscal Position
TABLE: MAIN REVENUE AND EXPENDITURE CATEGORIES (2017)
TABLE: FISCAL AND PUBLIC DEBT FORECASTS
Monetary Policy
Inflation In Ecuador Will Remain Structurally Low
10-Year Forecast
The Ecuadorian Economy To 2028
Structurally Lower Oil Prices And Business Environment To Weigh On Growth
TABLE: LONG-TERM MACROECONOMIC FORECASTS
Ecuador Country Risk Q4 2019THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS MACRO RESEARCH and is NOT a comment on Fitch Ratings’ Credit Rating. Any comments or data included in the report is solely derived from Fitch Solutions Macro Research and independent sources. Fitch Ratings’ analysts do not share data or information with Fitch Solutions Macro Research.ContentsPolitical Outlook
Domestic Politics
Moreno's Declining Approval Undermines Ecuador's Policy Shift
TABLE: POLITICAL OVERVIEW
Long-Term Political Outlook
AP Popularity On The Decline
Operational Risk
TABLE: OPERATIONAL RISK
Labour Costs
TABLE: LABOUR REGULATIONS GOVERNING FLEXIBILITY OF WORKFORCE
Legal Environment
TABLE: BUREAUCRATIC PROCEDURES
TABLE: BUREAUCRATIC BARRIERS
Global Macro Outlook
Potential Policy Missteps Pose The Largest Risk To Global Growth
TABLE: GLOBAL MACROECONOMIC FORECASTS (2019-2024)
TABLE: DEVELOPED MARKETS – 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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