The 6 external risks for the Ecuadorian economy in 2020

Next year it is challenging for Ecuador in economic matters. The International Monetary Fund (IMF) has identified six external risks that the country may face in 2020. The agency has already announced that it expects lower growth of the Gross Domestic Product (GDP) in the following year: 0.2%; before the projection was 0.5%.

The 6 external risks for the Ecuadorian economy in 2020

Issues such as the price of oil, the regional situation, Venezuelan migration, among others, can have an impact on the economic situation of the country and so that Ecuador can fulfill its agreement signed with the IMF, in February this year, to obtain a loan for $ 4.2 billion.

1. The price of oil: The agency notes that a sharp decline in oil prices may require a greater and more rapid adjustment. On the other hand, an increase in oil prices also remains a risk, because the government would have to spend more for subsidies.
2. More risk, more debt payment: The Fund says that a sharp increase in risk premiums (country risk) worldwide could generate more expensive debt and refinancing risks. Regional risks due to political instability in other parts of South America may increase the risk.
3. Restricted trade: The increase in global protectionism, says the IMF, that is, restricting trade between countries, could reduce global growth and demand for Ecuadorian products. China and USA They reached a first agreement to end the commercial war.
4. The lost awards: The Fund warns that ongoing legal disputes maintained by the Ecuadorian State may generate additional fiscal costs in 2020. For example, this year, Ecuador has lost legal disputes with oil companies such as Perenco and Chevron.
5. Venezuelan Migration: The multilateral warns that the effects of the Venezuelan crisis, which has driven migration, could have fiscal costs. The expenditure could reach an amount equivalent to 0.4% of GDP (about $ 400 million). In the medium term, migration can help Ecuador’s growth.
6. Less disbursements: The IMF warns of the possibility of multilateral disbursements below expectations. The staff has encouraged the authorities to strengthen the implementation of various programs and projects with other financial institutions in the world.

https://www.expreso.ec/actualidad/economia/riesgos-externos-economia-ecuatoriana-2020-1908.html