Weekly Report - 21 July 2016 (WR-16-28)

ECUADOR| Negative growth. On 17 July Ecuador’s President Rafael Correa admitted that the country’s economy has tipped into recession. Economic growth in the first quarter of the year was -3.0% year-on-year on central bank (BCE) figures. This represents a sharp decrease compared to the 3.2% growth registered in the first quarter of 2015 and shows just how much Ecuador’s economy has suffered as a result of persistently low international oil prices. Since then, the country posted -1% growth in the third quarter of 2015 and -1.2% growth in the fourth quarter of 2015. Remarking on these disappointing results during an event in Tena, a town in Napo province, Correa said: “Ecuador has had three consecutive quarters of negative growth, which definitely means an economic recession”. Correa went on to say that he expected the negative trend to continue in the second quarter, as Ecuador continues to recover from the devastating earthquake that hit the country in April, producing an estimated US$3bn in damages. The economic slowdown has affected various sectors but not all. According to the BCE figures, there was a contraction in the hotel & food services (-13.2%); communications (-7.8%); shrimping (-6.7%); and construction (-4.4%). On other hand there was positive growth in oil refining (61.6%); fishing (5.5%); and electricity & water (4.5%) which all showed more activity than in 2015. This led the BCE to conclude that the economy had reached “a turning point” and would start showing signs of a recovery in coming months. Thus the BCE maintained its forecast of year-end growth of 0.3%. However, this recovery will still depend on whether there is a rebound in oil prices. The BCE figures show that Ecuador exported almost more oil in the first quarter of 2016 than in the whole of 2015 but received less income. In 2015 the country exported 416,000 barrels of oil per day (bpd), valued at US$6.35bn (when the average price of oil was US$41.88 per barrel). Meanwhile from January to May 2016, Ecuador exported 382,000bpd which was valued at US$1.67bn (at an average price of US$28.73 per barrel). On the other hand, the strengthening of the US dollar has made Ecuador’s exports increasingly expensive.

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