Ecuador has substantial petroleum resources and rich agricultural areas. Because the country exports primary products such as oil, bananas, flowers and shrimp, fluctuations in world market prices can have a substantial domestic impact. Industry is largely oriented to servicing the domestic market, and some exports to the Andean Common market. Deteriorating economic performance in 1997-98 culminated in a severe economic and financial crisis in 1999. The crisis was precipitated by a number of external shocks, including the El Niño weather phenomenon in 1997, a sharp drop in global oil prices in 1997-98, and international emerging market instability in 1997-98. These factors highlighted the Government of Ecuador's unsustainable economic policy mix of large fiscal deficits and expansionary money policy and resulted in a 7.3 percent contraction of GDP, annual year-on-year inflation of 52.2 percent, and a 65 percent devaluation of the national currency, the Sucre, in 1999, which helped precipitate a default on external loans later that year.
On January 9, 2000, the administration of President Jamil Mahuad announced its intention to adopt the U.S. dollar as the official currency of Ecuador to address the ongoing economic crisis. The formal adoption of the dollar as currency on September 10, 2000, as opposed to merely pegging the Sucre to the dollar as Argentina had done, theoretically meant that the benefits of seigniorage would accrue to the U.S. economy. Subsequent protests related to the economic and financial crises led to the removal of Mahuad from office and the elevation of Vice President Gustavo Noboa to the presidency.
However, the Noboa government confirmed its commitment to dollarize as the centerpiece of its economic recovery strategy. The government also entered into negotiations with the International Monetary Fund (IMF), culminating in the negotiation of a 12-month standby arrangement with the Fund. Additional policy initiatives include efforts to reduce the government's fiscal deficit and to implement structural reforms to strengthen the banking system and regain access to private capital markets.
Buoyed by high oil prices, the Ecuadorean economy experienced a modest recovery in 2000, with GDP rising 1.9 percent. However, 70 percent of the population was estimated to live below the poverty line that year, more than double the rate in 1995.
In April 2007, after winning a referendum on constitutional reform, President Correa announced that he no longer intended that the country would make repayments to the IMF nor deal with the World Bank.
Economy - overview: |
Ecuador is substantially dependent on its petroleum resources, which have accounted for more than half of the country's export earnings and one-fourth of public sector revenues in recent years. In the late 1990s, Ecuador suffered its worst economic crisis, with natural disasters and sharp declines in world petroleum prices driving Ecuador's economy into free fall in 1999. Real GDP contracted by more than 6%, with poverty worsening significantly. The banking system also collapsed, and Ecuador defaulted on its external debt later that year. In March 2000, with inflation rising at an annual rate of 80%, Congress approved a series of structural reforms that also provided the framework for the adoption of the US dollar as legal tender. Dollarization stabilized the economy, and positive growth returned in the years that followed. However, the government of Alfredo PALACIO (2005-07) reversed economic reforms that reduced Ecuador's vulnerability to petroleum price swings and financial crises, and in 2006, seized the assets of Occidental Petroleum for alleged contract violations and increased taxes on other foreign oil companies. PALACIO's successor and former Economy Minister, Rafael CORREA, has repeatedly raised the specter of another debt default, rejected a partially negotiated free trade agreement with the US, and decreed additional tax hikes on private oil companies. Consequently, foreign direct investment remains below 2001-04 levels, and economic growth has slowed significantly. |
GDP (purchasing power parity): |
$98.28 billion (2007 est.) |
GDP (official exchange rate): |
$43.76 billion (2007 est.) |
GDP - real growth rate: |
1.8% (2007 est.) |
GDP - per capita (PPP): |
$7,100 (2007 est.) |
GDP - composition by sector: |
agriculture: 10% industry: 35% services: 54% (2007 est.) |
Labor force: |
4.55 million (urban) (2007 est.) |
Labor force - by occupation: |
agriculture: 8% industry: 24% services: 68% (2001) |
Unemployment rate: |
9.8% (2007 est.) |
Population below poverty line: |
38.3% (2006) |
Household income or consumption by percentage share: |
lowest 10%: 2% highest 10%: 35% note: data for urban households only (October 2006) |
Distribution of family income - Gini index: |
46 note: data are for urban households (2006) |
Inflation rate (consumer prices): |
2.2% (2007 est.) |
Investment (gross fixed): |
26.4% of GDP (2007 est.) |
Budget: |
revenues: $13.1 billion expenditures: planned $11.3 billion (2007 est.) |
Public debt: |
30.4% of GDP (2007 est.) |
Agriculture - products: |
bananas, coffee, cocoa, rice, potatoes, manioc (tapioca), plantains, sugarcane; cattle, sheep, pigs, beef, pork, dairy products; balsa wood; fish, shrimp |
Industries: |
petroleum, food processing, textiles, wood products, chemicals |
Industrial production growth rate: |
1.4% (2007 est.) |
Electricity - production: |
12.94 billion kWh (2005) |
Electricity - consumption: |
8.855 billion kWh (2005) |
Electricity - exports: |
16 million kWh (2005) |
Electricity - imports: |
1.723 billion kWh (2005) |
Oil - production: |
532,700 bbl/day (2005 est.) |
Oil - consumption: |
155,000 bbl/day (2005 est.) |
Oil - exports: |
420,600 bbl/day (2004 est.) |
Oil - imports: |
44,680 bbl/day (2004) |
Oil - proved reserves: |
4.63 billion bbl (1 January 2006 est.) |
Natural gas - production: |
249.4 million cu m (2005 est.) |
Natural gas - consumption: |
249.4 million cu m (2005 est.) |
Natural gas - exports: |
0 cu m (2005 est.) |
Natural gas - imports: |
0 cu m (2005) |
Natural gas - proved reserves: |
9.369 billion cu m (1 January 2006 est.) |
Current account balance: |
-$600 million (2007 est.) |
Exports: |
$13.3 billion (2007 est.) |
Exports - commodities: |
petroleum, bananas, cut flowers, shrimp |
Exports - partners: |
US 53.6%, Peru 8.2%, Colombia 5.6%, Chile 4.4% (2006) |
Imports: |
$13 billion (2007 est.) |
Imports - commodities: |
vehicles, medicinal products, telecommunications equipment, electricity |
Imports - partners: |
US 23.1%, Colombia 13.3%, Brazil 7.3%, Panama 4% (2006) |
Economic aid - recipient: |
$209.5 million (2005) |
Reserves of foreign exchange and gold: |
$3.618 billion (30 November 2007 est.) |
Debt - external: |
$17.56 billion (31 October 2007) |
Stock of direct foreign investment - at home: |
$14.67 billion (2006 est.) |
Stock of direct foreign investment - abroad: |
$8.442 billion (2006 est.) |
Market value of publicly traded shares: |
$4.04 billion (2006) |
Currency (code): |
US dollar (USD) |
Exchange rates: |
1 the US dollar is used; the sucre was eliminated in 2000 |
Fiscal year: |
calendar year |
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