After having recovered from the effects of the global crisis, Ecuador’s economy reached a robust growth in last years. In 2012, 2013 and 2014 growth decelerated moderately yet it maintained strong with rates of 5.2%, 4.6% and 3.8%, respectively.
The government of President Rafael Correa Delgado—who was re-elected for a new 4-year mandate in February by an ample margin of votes —maintains the double priority of eradicating poverty and amending the productive matrix for changing, thus, the country’s productive structure and to generate an economy sustainable and diversified oriented to knowledge and innovation. With this double priority, the public sector’s expense and investment have increased from 21% of the GDP in 2006 to 44% in 2013. A vast part of these resources was destined to both investment programs and projects in energy, infrastructure, and transportation, as well as in social sectors.
Economic growth in Ecuador has been inclusive, which has directly reduced poverty and inequality levels and increased the middle class. Between 2006 and 2014, poverty measured by income (using the national poverty line) decreased from 37.6% to 22.5%, whilst extreme poverty was reduced from 16.9% to 7.7%.
In addition, the inequality reduction has been quicker than in the region’s average: The Gini’s coefficient was reduced from 54 to 48.7 between 2006 and June 2014, since growth benefitted more the poorest. Between 2000 and 2011 a more pronounced increase of the income took place in the two poorest quintiles. In fact, the income of the poorest 40% of the population increased in 8.8%, compared with the average 5.8% of the country.
Despite these remarkable outcomes, there is still a lot to be done to sustain and to enlarge the achievements reached in poverty reduction and inequality, as well as of the economic growth. These challenges are associated with the overreliance of the economy on the oil sector. In recent months, the sharp decline in oil prices and the appreciation of the U.S. dollar have severely affected the trade balance and the financing of public investment, as well as the competitiveness of Ecuadorian exports. In this context, consolidating the reduction in inequality and poverty poses a major challenge. This is especially critical given that despite a significant decline in recent years, poverty rates remain high, particularly in rural areas.
Last Updated: Apr 17, 2015