Despite full dollarisation of the economy, the liquidity risk in Ecuador is relatively elevated. In fact, plummeting oil prices that exacerbated fiscal and external weaknesses inspired a downgrade of the short-term political risk classification to category 6 (from 4) in January 2016. Since then, oil prices have somewhat rebounded, however, and the IMF indeed revised its oil price projections upwards in its July World Economic Outlook (compared to the April Outlook). Moreover, Ecuador secured IMF support to cover its most urgent liquidity needs following the devastating earthquake that struck the country in April 2016. These elements imply that the likelihood of a liquidity crisis has significantly reduced in recent months. As such, Credendo Group judged that the time is right to upgrade the short-term political risk classification to category 5 (from 6).
04 Jun 2020
Ecuador: Trying to handle the double shock caused by covid-19 and low oil prices
Trying to handle the double shock