TRACKING TRENDS
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.
PERU| Positive growth streak continues. On 17 July Peru’s national statistics institute (Inei) reported that the domestic economy grew by 4.88% in May, completing 82 consecutive months of positive economic growth. The May result also brought the accumulated growth rate for the year to 4.10% and to 4.02% in the rolling 12-month period to May. Inei director, Aníbal Sánchez, said that growth in the first quarter was primarily driven by the mining & hydrocarbon sector, which registered a 33.24% increase in activity, the sector’s highest result for the past 14 and a half years. Sánchez said that this was driven by a 31.18% increase in exports of copper, zinc, tin, oil and natural gas. Sánchez also reported an increase in activity in the telecommunications sector (9.15%), as well as in construction (5.55%). In contrast the sectors that registered a significant fall in activity were fishing (-66.98%) and manufacturing (-7.52%). Still, the overall growth suggests that Peru’s domestic economy is continuing to recover from the slowdown it has been experiencing since mid-2014.
VENEZUELA | Plummeting auto production. Private automobile production in Venezuela fell by 85.8% in the first six months of 2016, compared with the same period in 2015, Venezuela’s automobile producers’ association (Cavenez) reported on 18 July. According to Cavenez’s monthly report, from January to June 1,550 vehicles were assembled in Venezuela, far short of the 10,922 assembled in the comparable period last year. US auto-maker Ford heads the list of major vehicle producers, followed by Mack, Iveco, General Motors, and Toyota (whose production was totally paralysed during the period). According to industry representatives, Venezuela’s automobile sector has a production capacity of 250,000 vehicles per year. However, the sector has suffered from a lack of US dollars; a lack of local credit facilities, which has led local manufacturers to amass large debts; and a lack of supply of locally produced auto-parts.
- Correa looks for the bright side
In revealing Ecuador’s latest economic growth figures, President Rafael Correa was frank about how negative the results were but nonetheless sought to look on the positive side. He admitted that the 2016 first quarter results were the worst of the decade and this was the first “decreasing growth” figure registered since the Ecuador dollarized its economy in 2001. However, he added that “although almost everything has happened to us, with a little luck we will still have positive growth in 2016”.