According to the head of the Central Bank, bonds issued last week for $ 3,000 million along with other oil revenues will cover more than 100% of private sector deposits in the central bank reserves. A reduction in public spending is under analysis within the government’s economic team in order to reduce the levels of indebtedness that the country currently faces.
That was one of the announcements of the manager of the Central Bank of Ecuador (BCE), Verónica Artola, in the program Frente a los Medios, in which she also explained the panorama of international reserves that has been questioned in recent weeks.
Did you expect the growth of 3.8% of GDP recorded between the third quarter of 2016 and the same period of 2017?
At the BCE, we did not expect such positive growth. We had forecasts of 1.5% growth for the end of 2017, but with the confidence that President Lenin Moreno has given since the beginning of his administration, we would expect the economy to grow more than expected.
What drove the reactivation and how will that rebound be sustained?
Household consumption is what drove growth in the third quarter of last year. This is reflected in the reactivation of credit and the confidence of the people to acquire it. More remittances from our migrants have also come in and the Ministry of Finance has been updated with some payments to small suppliers. All these factors helped the economy grow. The challenge is to have a sustained growth during the next four years. The BCE estimates that the economy will grow around 4% until 2021.
How to understand economic growth with a balance of payments with a negative balance?
We have already raised an alert about the behavior of the external sector. In 2017 we grew by 8.8% in imports and exports decreased by 0.5%. This is reflected in the balance of payments, which is the countable sheet of the income and expenses of the country. The deficit balance of the balance of payments is due to two factors: first, because we sell less than what we buy abroad (balance of goods) and second because we have a negative capital account.
That means that during the last quarter of 2017 we paid some resources, almost $ 1,600 million between amortization and debt service. We are aware that in a dollarized economy a healthy balance is indispensable and that is why we are thinking about the measures to do so.
In your opinion, how should the country’s debt be managed?
The previous week we made an issue of $ 3,000 million to better conditions and with a higher term. We know that the level of indebtedness cannot continue indiscriminately in the long term, but in the short term this was the option to have resources. Now we analyze how to reduce public spending to depend less on debt.
In January imports are registered for $ 1,000 million, is this figure for the trade balance worrisome?
January figures for imports have to be revised. We need a measure in the short term to improve the trade balance. We do not oppose imports because there are acquisitions of raw materials and capital that are very important for production, but in the third quarter of 2017 we saw that imports of consumer goods are almost 30% and are goods that are not essential for the economy and we could replace them with national products.
Why did the import of products such as processed dairy products that are produced in the country increase?
We have a very important variable that is the dismantling of the safeguards and that generated that we can buy more abroad. The European Union offers many products such as cheese or butter that have grown considerably. In any case, there is a dialogue with the Ministers of Agriculture and Industries to promote the consumption of the products we make here.
What perspectives are there for the construction sector for this year?
Only two branches of activity decreased in the third quarter of 2017 and construction is one of them. We have a decrease of 8.5% in annual terms. The BCE did estimate that in 2017 the sector would still be depressed, but we expect that by 2018 there will be growth of at least 1%. It is important to understand that the construction growth in 2013 or 2014 occurred, among other factors, due to the investment in public works and that allowed to have growth rates of almost 10%.
Now these investments (between $ 10,000 and $ 11,000 million annually) are no longer necessary. We hope that the private sector will boost this sector accompanied by the Casa para Todos program. (I)