Fear about Ecuador’s liquidity position as a result of detrimental external dynamics has been translated into the country’s 2-notche downgrade. First, with oil until recently representing more than 30% of government revenues and more than 40% of foreign exchange receipts, low oil prices have exacerbated Ecuador’s twin deficit. The government balance moved from being break-even in 2011 to showing a deficit of 5.4% of GDP in 2014. Doubts moreover prevail about the feasibility of reining in the budget shortfall in the years ahead. The current account deficit amounted to 0.6 % of GDP in 2014, but is estimated to have grown to 2.6% in 2015. Second, because the Ecuadoran economy is fully dollarised, the strength of the US currency will hurt international competitiveness. Third, because investor and financial market confidence in Ecuador remains limited, there is a significant downside risk related to FDI and capital inflows. If these turn out lower than expected, the resulting financing gap could result in a liquidity crunch, which could in turn inspire the government to impose import or capital controls.
16 May 2019
Malgré les réformes structurelles en cours, les enjeux économiques et politiques ne sont pas près de disparaître
Le Président Moreno est confronté à une situation politique tendue, qui risque de se durcir à l'approche des élections législatives de 2021.