Overview

  • Thanks to the boom in oil prices, between 2007 and 2014, Ecuador experienced a period of growth and poverty reduction. This boom hid some structural problems — such as an inefficient public sector, large macroeconomic imbalances, a lack of stabilization mechanisms, and low private investment — which became evident when prices fell.

    Since 2014, Ecuador has been trying to balance and adapt its economy to a challenging international context characterized by low oil prices, the dollar appreciation, and increasing external financing costs. In the absence of fiscal savings, the government began a process of rationalizing public investment and current expenditures. It has also mobilized different sources of external financing and applied temporary measures to increase non-oil public revenue.

    While the fiscal consolidation underway has reduced the fiscal deficit from a peak of 7.3 percent of GDP in 2016 to 1.2 percent in 2018, there is a long road ahead to achieve shared prosperity. GDP growth averaged just 0.6 percent between 2015 and 2018, and poverty and the Gini coefficient have remained relatively stable —at around 22.5 percent and 0.47, respectively— since 2014.

    In March 2019, the International Monetary Fund approved an agreement with Ecuador to provide support to government economic reforms framed within a broad program of reforms proposed in the 2018-2021 Prosperity Plan. Several international institutions, including the World Bank, committed financial support of USD 10 billion to support this plan.

    The program includes measures to ensure fiscal sustainability, strengthen the foundations of dollarization, and promote private investment while guaranteeing social protection of the most vulnerable population.

    It is essential to improve the effectiveness and progressiveness of fiscal policy to achieve a consolidation that guarantees macroeconomic stability, protects the most vulnerable people, and preserves the confidence of the private sector. The plan also proposes improving the provision of public services and creating mechanisms that protect the country from fluctuations in oil prices.

    The government is also working to strengthen the foundations of dollarization by enhancing the Central Bank institutional framework, building up international reserves, and improving oversight of financial intermediaries.

    Given the importance of private investment, the government is aiming at fostering it to improve competitiveness and job creation. In a context in which public investment cannot longer drive growth, it is crucial to promote an conducive investment climate and facilitate capital and labor mobility to emerging economic activities.

    The fulfillment of this reforms will be critical to establish the groundwork for achieving sustainable growth, which will enable the country to continue reducing poverty.

    lastupdated: Apr 10, 2019

  • On March 15, 2016, the World Bank Executive Board approved the Country Engagement Note (CEN) for Ecuador. This document establishes the action framework agreed upon by the Government of Ecuador and the World Bank Group. The CEN will be in effect until June 2017.

    The CEN prioritizes two work pillars:

    • Maintenance of the advances made in basic service delivery and strengthening of safety nets; and
    • Promotion of economic diversification.

    A crosscutting theme is the mitigation of climate change and environmental threats.

    Through these pillars, the World Bank supports government efforts to maintain social services for the most vulnerable populations, improve access to and quality of infrastructure and identify ways to promote economic diversification that is consistent with government demand.

    In Ecuador, the World Bank has a portfolio of eight financing projects totaling US$ 958.50 million: Transformation of the Tertiary Technical and Technological Institutes; Transport Infrastructure Improvement of Ibarra; Supporting Education Reform in Targeted Circuits; Guayaquil Wastewater Management; Sustainable Family Farming Modernization  in Ecuador; Manta Public Services Improvement; Emergency Recovery Loan; and Quito Metro Line One.

    Additionally, the World Bank has provided grants and technical assistance to support different government sectors and agencies.

    World-Bank financed projects of the Government of Ecuador are briefly described below:

    The Project for Transformation of the Tertiary Technical and Technological Institutes seeks to increase access, permanence and graduation rates of public technical and technological programs designed and implemented in collaboration with employers. Additionally, it works to strengthen the management of institutions of technical and technological education.

    The Project for Sustainable Family Farming Modernization aims to improve irrigation management and incomes of farm families in Ecuador by optimizing land productivity. The project is jointly funded by the Spanish Agency for International Development Cooperation.

    The Project Supporting Education Reform in Targeted Circuits works to promote enrolment in basic education and to improve attendance rates in secondary school in selected areas of the provinces of Pichincha, Los Ríos, Guayas and Bolívar.

    lastupdated: Apr 10, 2019

  • Key achievements of recently concluded projects include:

    Investments for the Development of Chimborazo

    The project rehabilitated 55 irrigation systems, which benefited approximately 8,000 families. Users with good agricultural practices have increased their income by 30%, as compared with farmers who do not employ those practices.

    Additionally, 50 kilometers of roads were improved, enabling access to health and education services and transport of agricultural production. This resulted in a 50% reduction in transport time and a 55% savings in the maintenance of vehicles traveling those roads.

    Promoting the Competitiveness of Ecuadorian Industries and Value Chains through the Strengthening of Supply of and Demand for Industrial Services

    This advisory work for the Ministry of Industries and Productivity included two activities: the analysis of the supply of and demand for industrial services in Ecuador, with an emphasis on services to knowledge-intensive firms and on the design of a comprehensive plan of action to strengthen supply of and demand for industrial services, particularly services to companies.

    This support included a review of selected good practices in international industrial and service policies and a comparative analysis of different policy alternatives to promote industrial competitiveness through services to knowledge-intensive firms.

     

    lastupdated: Apr 10, 2019

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Additional Resources

Country Office Contacts

ECUADOR +5932 294-3600
Calle 12 de Octubre 1830 y Cordero, World Trade Center, Torre B, piso 13. Quito
cmedina1@worldbank.org
USA +1 202 473-1000
1818 H Street NW, Washington, DC 20433
cmedina1@worldbank.org