With a sense of optimism about the advance of vaccination and a government that “is friendly” with private investment, the second half of this year is likely to record a better performance compared to initial projections.
That is the perception of analyst Walter Spurrier, who together with Alberto Acosta Burneo, editor of Weekly Analysis, reviewed the 2021-2022 political and economic scenarios on Thursday.
Analysts agreed that some sectors are showing signs of recovery and could end with growth, although challenges remain to reach pre-pandemic levels.
Spurrier mentioned that trade would expand 3.7% in 2021 after a contraction of -7.8% in 2020 and manufacturing would recover 3.1% after the fall of -6.9% the previous year. While agriculture would benefit from a 2.9% recovery this 2021.
One of the sectors that will continue to struggle to get out of the contraction will be construction, which fell by -11% in 2020 and would slide by -1.4% in 2021.
Although Ecuador would not have a strong growth rate in 2021, Spurrier estimated that it is likely that the official estimate of 2.8% will be exceeded, and as of 2022 Ecuador could begin a period of strong growth.
Externally, there are factors that could contribute to an improvement for the country. Spurrier considered that high prices of raw materials improve Ecuador’s balance of payments and fiscal accounts.
Oil has risen and an average price of over $ 62 per barrel is hinted at for Ecuadorian exports this year. According to Spurrier, that would mean roughly $ 2.5 billion more than in 2020 of net exports.
Furthermore, Ecuador now has the best profile among the Andean countries for foreign investment, says the analyst.
Citing a Forbes study, Spurrier mentioned that Ecuador is the second country, after El Salvador, where there is optimism about the economic future.
At the regional level, Peru has taken a turn with a left-wing government, while in Colombia and Chile that trend is growing.
One of the challenges for this government, according to Spurrier, will be to find a solution to the fiscal crisis. “Ecuador needs to turn a fiscal deficit into a surplus, which means that any additional income from the government would go towards reducing the deficit, not increasing spending,” he says.
Another problem to be solved is in the electric field, with hydroelectric plants that cannot reach their maximum nominal power and some thermal power plants that are offline. “Next year, Ecuador may not be able to meet the demand and there could be a return to the blackouts,” Spurrier said.
Alberto Acosta Burneo, who reviewed foreign trade figures and the financial system, stressed that the Government is considering the productive sector for the adoption of some changes such as the construction of a modern industrial policy and the decision to seek free trade agreements and become part of the Pacific Alliance.
For the analyst, one of the challenges that this Government will have will be in the National Assembly, which must endorse or reject proposals for labor, banking, tax and trade agreements reforms.
Acosta Burneo indicated that the signals that this government has given point to greater private participation. In this sense, he cited, for example, changes in investment contracts, the creation of a new legal framework to encourage private participation in areas currently reserved to the State, the new regulation for oil that encourages private participation through the concession of oil assets.
One of the issues that concern this analyst is related to the mechanism that is being implemented to reduce interest rates.
Until August 30, the Central Bank of Ecuador (BCE) must publish a methodological document for calculating the interest rate and as of October 1, the new methodology must be applied progressively in all credit segments.
“Unfortunately, this new attempt to set interest rates is based on an important theoretical error: thinking that costs are what set prices,” said Acosta Burneo. (I)