In the second quarter of the year, the Ecuadorean economy grew by 8.9% year-on-year (y-o-y), according to central bank figures. The bank’s president, Diego Borja, said that the second quarter data followed surprisingly strong first quarter growth of 8.6% and suggests that the economy will grow at a similar rate for the year as a whole.
The central bank, nevertheless, is sticking to its 5.1% GDP growth forecast for 2011. This would be the arithmetical result of growth falling to zero in the final two quarters of 2011.
The central bank said that investment was strong, rising 17.2% in the second quarter (y-o-y) thanks to credit from China. Household consumption, however, was up by only 6.9%, again suggesting that growth, in fact, could accelerate in the final two quarters of 2011.
It is clear that the government, through its spending on infrastructure, is driving the economy. The government’s opponents argue that such a model means that if government spending falls, the growth rate quickly withers.
The other key variable for the government is oil prices. These have held up this year and, more importantly, the state oil company, Petroecuador, has increased output.
The fastest growing sectors are electricity (up 35%, y-o-y); construction (up 26%); financial services (up 13%); other services (11.9%); and commerce (6.8%).
The most tangible sign of the growth has been the creation of new jobs. Despite the jump in unemployment in Spain, which has been a key destination for Ecuadorean expatriates seeking to better themselves, the official national unemployment rate has dropped from 7% in the first quarter to 6.4% in the second. The biggest demand for labour has come from construction, commerce and, somewhat surprisingly, manufacturing.
In 2012 the pending maintenance work on the Esmeraldas refinery will hit the contribution of the oil industry to GDP. The trade account will also be affected because imports of oil products will have to rise to compensate for the lost Esmeraldas output.
Inflation: In September the scorching pace of GDP growth started to push up inflation. The monthly rate was 0.79%, bringing the rate for the past 12 months in this dollarised economy to 5.4%, according to the Instituto Nacional de Estadísticas y Censos (Inec). The central bank had been forecasting 3% inflation for 2011, but in the first nine months of the year the consumer price index has already risen 4.3%. The Inec reckons that the cost of the canasta familiar básica (an average family of four’s monthly spending on staples), which includes food, housing, travel and recreation was US$567 while the same average family’s monthly income was US$493.
Monopolies: On 29 September the Asamblea Nacional approved (by 67 votes in favour to 23 against, with 34 abstentions) a law which gave the authorities the power to correct “market abuses”. Technically, the law is called the Ley de Regulación y Control del Poder del Mercado and the government claims that it is designed to prevent companies acting as monopolies. The law also forces banks to sell all but a 6% stake in any media companies they own.
- Production costs on the rise
The Inec reported that producer prices were up by 0.14% in September and have risen by 6.7% in the past 12 months.
