Economy remains in crisis despite small gains

Although the country’s economy showed modest growth in the first quarter of 2021 over the last quarter of 2020, the overall outlook is uncertain. “We remain in a deep recession as a result of the pandemic and other factors,” says Ecuador Central Bank President Guillermo Avellán.

Central Bank President Guillermo Avellán  with President Guillermo Lasso.

“The GDP grew 0.7 percent from January through March 2021 compared to the end of 2020 but this is still a contraction of 5.5 percent from the first quarter of 2020, before the impact of the pandemic was felt,” he said. “We expect some improvement during the rest of 2021 but this depends on the progression of the virus as well as the recovery of international markets.”

The bright spot in the economy during the first quarter, Avellán said, was household spending, which increased 3.5 percent. “I expect the spending to continue since there is pent-up demand for many goods and services from the months of health restrictions that affected people’s ability to make purchases,” he said.

The major drags on the economy were reduced government spending, -8.5 percent, the hotel and restaurant industry, -9 percent, construction, -10.4 percent, and domestic services, -9.2 percent. Other negative factors were an overall 3 percent decrease in exports and 2 percent increase in imports.

Among the sectors that showed improvement in the first quarter were commercial fishing, up 16.2 percent, package delivery and communications, up 4.3 percent, and oil refining, up 3 percent.

Avellán expects net positive growth for 2021 of 2.8 percent but said this is subject to revision based on the course of the pandemic. “We are, of course, starting at very low baseline,” he said.