The economy is gradually recovering from the slowdown triggered by the pandemic. The health crisis revealed structural weaknesses such as the dependence on oil exports, the lack of macroeconomic buffers, limited access to capital markets, high rates of employment informality and unequal access to public services.
The government is working to return to a path of sustainable growth and shared prosperity. It seeks to increase quality employment opportunities by creating a more enabling environment for investment and productivity while continuing to enhance the sustainability and transparency of public finances. It is also addressing a wide range of issues affecting Ecuadorians by improving access to and quality of health and education services, reducing chronic child malnutrition and strengthening citizen security. The government has also initiated an ecological transition and is improving natural resource management, including integrated water resource management and climate change adaptation and mitigation measures.
These challenges assume even greater urgency against a backdrop of risks to the Ecuadorian economy and population arising from external factors such as the war in Ukraine, a downturn in the world’s leading economies and rising international inflation rates.
These risks not only impact the country’s economic performance, but also affect consensus-building efforts to bring about social and political stability and to address future challenges. The lack of consensus concerning critical reforms could perpetuate the economic pendulum linked to oil price cycles and prevent the country from achieving strong, inclusive growth while adjusting to the global decarbonization process.
Ecuador continues its efforts to consolidate its macroeconomic stability and avoid an unsustainable increase in debt. Fiscal discipline will therefore play a critical role in preventing high oil prices from generating a new round of procyclical spending growth leading to a drag on spending efficiency, perpetuating macroeconomic imbalances and preventing the creation of fiscal buffers. Given its high vulnerability to climate change, Ecuador is also striving to mitigate the effects of this global climate challenge and, with private sector assistance, to dissociate economic growth from greenhouse gas emissions.
Ecuador also needs to promote sustainable, inclusive growth over the medium and long term. This could be achieved by systematically improving the investment environment to provide opportunities for resuming a growth path that would be less dependent on oil, which could be displaced by renewable energies in the medium term. This requires adopting measures to boost private and foreign investment in new sectors, and to enable production factors, especially the workforce, to have the flexibility to gravitate toward the most productive emerging sectors.
Ecuador is also seeking to improve the efficiency of its public policies to protect its most vulnerable population and provide it with access to better opportunities. To this end, it is vital to tackle long-standing challenges, aggravated by the health crisis, such as the high rates of child malnutrition, the need to improve the quality of public services, enhance and increase spending on healthcare, education and social protection and focus on the needs of the rural population. To achieve this requires evidence-based decision making, more efficient management of public resources and better coordination between the different levels of government and sectors.
Last Updated: Apr 04, 2023