Overview

Between 2006 and 2014, GDP growth averaged 4.6 percent, thanks to robust oil prices and important external financing flows. This stimulus allowed for increased social spending, particularly in the energy and transportation sectors. According to national poverty lines, poverty rates fell from 37.6 percent to 22.5 percent during this period. The Gini Index declined from 0.54 to 0.47 given that growth benefitted the poorest population more than other segments.  

Nevertheless, the advances of the past decade are at risk due to the economic deceleration the country is experiencing as a result of the decline in oil prices since late 2014, the difficulty in accessing new funding sources and the appreciation of the dollar. Poverty even rose slightly, from 22.5 percent in 2014 to 23.3 percent in 2015, which reflected an increase in rural poverty, from 35.3 percent to 39.3 percent.

Given Ecuador’s lack of a local currency and the limited liquid assets needed to confront the complex economic situation, the new global context has triggered a significant decline in domestic demand, especially public demand. The government has been forced to sharply reduce public investment and to curb spending, despite efforts to explore external financing options and increase non-oil revenue.  This reduction of public spending has negatively affected economic activity, despite government protection of strategic investments and more rational public spending. Additionally, the rapid macroeconomic deceleration has affected prospects of households and firms – reflected, for example, in levels of consumer and business confidence, as well as private consumption levels – putting added pressure on domestic demand.

In this difficult period, Ecuador must adapt to the new international context in an organized way to maintain economic stability, resume strong growth in the medium term and protect the important social advances made during the past decade.  To this end, it is essential to strengthen the efficiency of and gradual increase in public spending to ensure that fiscal consolidation does not threaten poverty reduction or the most important investment projects. Finally, with less dynamic public investment, the country must improve the investment climate and confidence levels of private investors to revitalize private investment. More robust private sector activity would also help to diversify the Ecuadorian economy and increase its productivity. 

Last Updated: Apr 11, 2016

On March 15, 2016, the World Bank Group 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 the diversification of the economy.

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

Through these pillars, the World Bank will support 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 seven financing projects totaling US$868 million: Support to Education Reform in Targeted Circuits; Wastewater Management in Guayaquil; Automated Irrigation Systems for Small and Medium-sized Producers in Ecuador; Improvement of Transport Infrastructure of Ibarra; Improvement of Public Services of Manta; Risk Mitigation and Disaster Recovery in Ecuador; 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 Automated Irrigation Systems for Small and Medium-sized Producers seeks to improve irrigation management and income of farm families in Ecuador by optimizing land productivity. The project is jointly funded by the Spanish Agency for International Development Cooperation.

The Project to Support the 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.

The Project for Risk Mitigation and Disaster Recovery in Ecuador seeks to reduce the potential effects of El Niño and the eruption of the Cotopaxi Volcano, as well as to support the recovery of basic and productive services in the case of a natural disaster.

Last Updated: Apr 11, 2016

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.

 

Last Updated: Apr 11, 2016

LENDING

Ecuador: Commitments by Fiscal Year (in millions of dollars)*

*Amounts include IBRD and IDA commitments