Macroeconomic country-assessment – Ecuador

Ecuador is a middle-income country facing many challenges, including significant political instability, declining socio-economic performance since the fall in oil prices in 2014-2015, and a macroeconomic situation vulnerable to exogenous shocks. To support a sustainable and less volatile development trajectory, AFD works in many sectors: water and sanitation, education, energy transition, sustainable urban development and support for civil society action.

Produced by AFD's team of risk-country economists, country assessments provide an analysis of development processes in countries in which AFD operates. They also characterize their growth trajectory, and detect economic, social, political and financial vulnerabilities associated with these trajectories. AFD Group is thus in a position to properly measure the challenges and monitor the risks associated with each of its investments.

Emphasis is placed on developing countries, particularly in Africa, for which macroeconomic analyses are rare or infrequent. AFD seeks to complement existing production on the global economic situation, more focused on advanced economies and major emerging countries.

Find out more: Macroeconomic Analyses at AFD

Country-risk analysis is based on a close follow-up over a long period of time and rooted in a fine knowledge of local contexts. Cyclical trends, often highlighted in the news, are always examined in the light of structural trends and of the regional context in which they take place. The aim is to highlight country-specific macroeconomic issues while assessing risks against comparable time- and space-based trajectories.

Country-risk economists place the study of socio-political vulnerabilities, the growth model, the viability of public debt, external balances and the soundness of the financial system at the heart of their assessment, and give specific attention to countries' exposure to climate risks.

Beyond the cyclical upheavals (linked in particular to the volatility of oil prices) that led the country to fail several times over the last two decades, the Ecuadorian economy is characterized by many structural challenges. It is, relative to peer countries, uncompetitive and unproductive, which hinders the development of sustainable growth drivers. Dollarization, which has allowed macroeconomic stabilization, requires significant budgetary discipline to ensure the sustainability of public debt, which is regularly threatened. However, high political instability is holding back reforms and an economic paradigm shift – even as people’s expectations are high to improve a declining standard of living since 2015.

Download our publications on the macroeconomic situation of Ecuador:

• “Ecuador: A narrow path out of the crisis”, in MacroDev Panorama n°36, September 2021
• “Twenty years of official dollarization in Ecuador: A blessing or a curse?”, MacroDev n°31, July 2020 (also available in French and Spanish)

Contact:

• Benoît Jonveaux, country-risk economist, AFD