Economy grows in first quarter of 2017, boosted by EU trade agreement

Ecuador’s economy showed unexpectedly strong 2.6% growth in the first quarter of 2017. According to Central Bank director Verónica Artola, the positive numbers are fueled by exports, primarily to the European Union.

Export of Ecuador bananas rose in early 2017.

“We are over the hump,” Artola said, referring to the recession that has gripped the economy for almost two years and the fact that the GDP (Gross Domestic Product) has grown for two consecutive quarters.

Exports rose 8 percent from January through March, fueled mostly by larger shipments of bananas and fish to the EU.

Artola also said that growth has also been sparked by growth in personal consumption of durable goods, manufacturing and banking.

President of Ecuador’s Federation of Chambers of Commerce Patricio Alarcón said the growth was also a reflection of the elimination of import surcharges and the reduction of the VAT tax from 14% to 12%. “Imports are growing which means domestic sales are rising,” he said, citing 9% growth in clothes sales and 15.5% for manufacturing equipment.

“Overall, changes in the economy have created greater liquidity, which helps everyone,” Alarcón said.

The bad news was the construction sector, where applications for new building permits dropped again in Quito and Guayaquil although they rose slightly in Cuenca. The Quito construction association claims that the sector remains in a “depression.”

Arteola cautioned that the strong first quarter numbers may not hold for the entire year. “The numbers are enhanced because of large government investment early this year and the pent-up demand that was satisfied by the EU deal. For the year, I am predicting a modest 1% growth. We are not out of the woods yet but conditions are improving.”