LATIN FOCUS CONSENSUS FORECAST

ECUADOR 2CALENDAR 8NOTES 10

Contributors

PUBLICATION DATE 21 April 2015FORECASTS COLLECTED 14 April - 20 April 2015

INFORMATION AVAILABLE Up to and including 20 April 2015 NEXT EDITION 19 May 2015

LATINFOCUS CONSENSUSFORECAST

Ecuador • April 2015

ARNE POHLMAN Chief EconomistARMANDO CICCARELLI Head of ResearchRICARDO ACEVES Senior EconomistRICARD TORNÉ Senior EconomistOLGA COSCODAN Economist

CARL KELLY EconomistTERESA KERSTING EconomistDIRINA MANÇELLARI EconomistANGELA BOUZANIS EconomistCECILIA SIMKIEVICH Economist

ROBERT HILL Economist ERIC DENIS Economist MIRIAM DOWD Editor

FOCUSECONOMICS Ecuador

LatinFocus Consensus Forecast | 2

April 2015

REAL SECTOR | GDP expands at slowest pace in over four years in Q4In Q4 2014, GDP grew 3.5% over the same quarter of the previous year, which came in below the 3.7% increase registered in Q3 and represented the slowest pace of growth since Q2 2010.

Q4’s slowdown mainly reflected a deterioration of the external sector. Total consumption growth remained at Q3’s 4.6% in Q4. Private consumption growth inched down from Q3’s 4.5% to 4.3% in Q4, while growth in government spending accelerated from Q3’s 5.2% to 6.1% in Q4. Fixed investment growth also sped up, rising from 3.5% in Q3 to 4.0% in Q4.

Exports of goods and services moderated in Q4, falling from a 5.8% increase in Q3 to a 3.8% rise. Imports moderated from Q3’s 7.8% increase to a 7.0% expansion in Q4. As a result, the external sector’s net contribution to overall growth worsened from minus 0.8 percentage points in Q3 to minus 1.1 percentage points in Q4, the worst result since Q3 2013.

In seasonally-adjusted terms, the economy expanded 0.5% over the previous quarter, coming in below Q3’s 1.4% increase. Ecuador’s finance minister stated in late March that the government expects growth of 3.8% this year, which is down from the government’s last forecast of 4.1% in November

Lower oil prices and a stronger U.S. dollar will be hurdles to Ecuador’s growth in the coming months. Crude oil makes up nearly half of total exports and approximately one quarter of government revues and subdued oil export values have forced the government to reevaluate its budget. Furthermore, a strengthening U.S. dollar threatens exports of the dollarized economy. The use of the U.S. dollar as the official currency also means expansionary monetary avenues available to the Central Bank are limited. Measures taken by the government in response to lower revenues include a 4% cut in public spending and the imposition of import tariffs. On 14 April, the Correa administration announced that it would end its pension subsidy in an effort to save the government an estimated USD 1 billion a year.

LatinFocus Consensus Forecast panelists expect the economy growing just 1.3% in 2015, which is unchanged from last month’s forecast. In 2016, panelists expect GDP to expand 2.5%.

Inflation came in at 3.8% in March, which is slightly below February’s reading of 4.1%. The panel expects inflation to end 2015 at 3.4% and 2016 at 3.7%.

Outlook stable

LONG-TERM TRENDS | 3-year averages

Robert HillEconomist

Ecuador

Ecuador

Gross Domestic Product | variation in %

Note: Year-on-year changes of GDP in %.Source: Ecuador Central Bank (BCE) and LatinFocus Consensus Forecast.

0.0

2.0

4.0

6.0

8.0

10.0

Q1 2011 Q1 2012 Q1 2013 Q1 2014 Q1 2015

%



April 2015

LatinFocus Consensus Forecast panelists see GDP expanding 1.3% in 2015, which is unchanged from last month’s projection. For 2016, they expect GDP to grow 2.5%.

REAL SECTOR | Economic activity rebounds up in FebruaryIn February, economic activity increased 0.2% over the same month last year, according to the monthly indicator for economic activity (IDEAC, Indice de Actividad Economica Coyuntural). The print contrasted January’s revised 0.9% contraction (previously reported: -2.1% year-on-year).

Despite February’s weak expansion, annual average growth in economic activity decreased from January’s 4.6% to 4.3% in February.

MONETARY SECTOR | Inflation recedes in MarchIn March, consumer prices rose 0.41% over the previous month, which followed the 0.61% increase tallied in February and marked the lowest reading in three months. The increase in consumer prices mainly resulted from higher prices for food and non-alcoholic beverages and for restaurants and hotels.

Headline inflation fell from 4.1% in February to 3.8% in March. Conversely, annual average inflation inched up from February’s 3.7% to 3.8% in March.

FocusEconomics Consensus Forecast panelists foresee inflation at 3.4% at the end of 2015, which is up 0.5 percentage points from last month’s estimate. In 2016, FocusEconomics Consensus Forecast participants expect inflation to increase to 3.7%.

Inflation | Consumer Price Index

Note: Year-on-year and month-on-month changes of consumer price index in %.Source: National Statistical Institute (INEC).

1.0

2.0

3.0

4.0

5.0

-0.3

0.0

0.3

0.6

0.9

Mar-13 Sep-13 Mar-14 Sep-14 Mar-15

Month-on-month (left scale)

Year-on-year (right scale)

%

Economic Activity | variation in %

Note: Year-on-year changes and annual average variation of economic activity in %.Source: National Statistical Institute (INEC) and FocusEconomics calculations.

2.0

4.0

6.0

8.0

10.0

12.0

-5.0

0.0

5.0

10.0

15.0

20.0

Feb-13 Aug-13 Feb-14 Aug-14 Feb-15

Year-on-year (left scale)

Annual Average (right scale)

% %



April 2015

Economic Indicators | 2010 - 2019



April 2015

Real Sector | Gross Domestic Product and Fiscal Balance

1 | Real GDP | 2000-2019 | var. in %

3 | GDP 2015 | evolution of forecasts

5 | Unemployment | % of active pop.

7 | Unemployment | evolution of fcst

2 | Real GDP | Q1 12-Q4 16 | var. in % Economic Growth and Fiscal Balance

4 | GDP 2016 | evolution of forecasts

6 | Fiscal Balance | % of GDP

8 | Fiscal Balance | evolution of fcst Notes and sources

General: Long-term chart period from 2000 to 2019 unless otherwise stated. All real sector data are from the Central Bank (BCE, Banco Central del Ecuador) and the National Statistical Institute (INEC, Instituto Nacional de Estadística y Censos). Forecasts based on LatinFocus Consensus Forecast. 1 GDP, annual variation in %. Source: BCE.2 Quarterly GDP (not seasonally adjusted), year-on-year variation in %.

Source: BCE.3 GDP, evolution of 2015 forecasts during the last 18 months.4 GDP, evolution of 2016 forecasts during the last 18 months.5 Unemployment, % of active population. Source: INEC.6 Balance of non-financial public sector as % of GDP. Source: BCE.7 Unemployment, evolution of 2015 and 2016 forecasts during the last 18

months.8 Balance of non-financial public sector as % of GDP, evolution of 2015

and 2016 forecasts during the last 18 months.



April 2015

Monetary and External Sector | Inflation and Exchange Rate

9 | Inflation | 2000 - 2019 | in %

11 | Inflation 2015 | evolution of fcst

13 | Current Account | % of GDP

15 | Current Account | evol. of fcst

10 | Inflation | Q1 12-Q4 16 | in % Consumer Price Index and Current Account

12 | Inflation 2016 | evolution of fcst

14 | Trade Balance | USD bn

16 | Trade Balance | evol. of fcst

Notes and sources

General: Long-term chart period from 2000 to 2019 unless otherwise stated. All monetary and external sector data are from the Central Bank (BCE, Banco Central del Ecuador) and the National Statistical Institute (INEC, Instituto Nacional de Estadística y Censos). Forecasts based on LatinFocus Consensus Forecast. 9 Inflation, annual variation of consumer price index (CPI) in % (eop).

Source: INEC.10 Quarterly inflation, annual variation of consumer price index (CPI) in %

(eop). Source: INEC.11 Inflation, evolution of 2015 forecasts during the last 18 months.12 Inflation, evolution of 2016 forecasts during the last 18 months.13 Current account balance as % of GDP. Source: BCE.14 Trade balance, exports and imports, in USD. Source: BCE.15 Current account balance as % of GDP, evolution of 2015 and 2016

forecasts during the last 18 months.16 Trade balance, evolution of 2015 and 2016 forecasts during the last 18

months.



April 2015

Ecuador in the Region

Population | %-share in Latin America GDP | %-share in Latin America

Fact Sheet

Ecuador1.3%

Brazil37.7%

Mexico21.2%

Argentina10.5%

Colombia6.4%

Other22.7%

Ecuador2.7%

Brazil33.7%

Mexico19.8%

Colombia7.9%

Argentina7.0%

Other29.0%

U.S.A.26.9%

EU-2711.5%

Other Asia ex-Japan

7.9%

China11.2%

Other LatAm18.0%

Colombia8.7%

Panama6.6%

Other9.3%

U.S.A.44.7%

EU-2710.3%

Other LatAm16.2%

Chile8.4%

Peru8.4%

Other11.9%

Other2.7%

Manufact. Products74.2%

Mineral Fuels15.3%

Food7.9%

Other4.7%

Manufact. Products

7.9%

Mineral Fuels57.6%

Food29.9%

Trade Structure

Primary markets | share in %

Primary products | share in %

Economic Structure

GDP by Sector | share in % GDP by Expenditure | share in %

Exports

Exports Imports

-20

0

20

40

60

80

100

1202005-07 2009-11 2011-13

Net Exports

Investment

GovernmentConsumption

PrivateConsumption

0

20

40

60

80

1002005-07 2009-11 2011-13

Agriculture

Manufacturing

Other Industry

Services

General Data

Economic Infrastructure

Political Data

Long-term Foreign Currency Ratings

Strengths Weaknesses

• Substantial oil wealth

• Polarized political system• High potential for social unrest.

.

• High dependence on oil revenues

• Government pledges to maintain dollarization

• Dollarization provides safe calculation base

Energy (2012)Primary Energy Production (trillion Btu): 1,247Primary Energy Consumption (trillion Btu): 640Electricity Generation (billion kW-h): 22.1Electricity Consumption (billion kW-h): 19.0Oil Supply (thousand bpd): 505Oil Consumption (thousand bpd): 248CO2 Emmissions (million metric tons): 37.2

Agency Rating OutlookMoody’s: B3 StableS&P: B+ StableFitch Ratings: B Stable

Telecommunication (2013) Telephones - main lines (per 100 inhabitants): 15.2Telephones - mobile cellular (per 100 inhabit.): 111Internet Users (per 100 inhabitants): 40.4Broadband Subscriptions (per 100 inhabitants): 6.3

Transportation (2013) Airports: 432Railways (km): 965Roadways (km): 43,670Waterways (km): 1,500Chief Ports: Guayaquil, Manta

Official name: Republic of EcuadorCapital: Quito (2.2m)Other cities: Guayaquil (2.6m)

Cuenca (0.3m)Area (km2): 283,561Population (million, 2014 est.): 15.8Population density (per km2, 2014): 55.6Population growth rate (%, 2014 est.): 1.4Life expectancy (years, 2014 est.): 76.4Illiteracy rate (%, 2011): 8.4Language: Spanish, QuechuaMeasures: Metric systemTime: GMT-5

President: Rafael Correa DelgadoLast elections: 17 February 2013Next elections: 2017Central Bank Governor: Mateo Villalba Andrade Imports

FOCUSECONOMICS


April 2015

Economic Release Calendar

Date Country Event21 April Argentina March Merchandise Trade22 April Brazil March Balance of Payments23 April Argentina April Consumer Confidence23 April Mexico February Economic Activity (IGAE)24 April Argentina February Economic Activity24 April Argentina March Industrial Production24 April Colombia Central Bank Meeting27 April Brazil April Consumer Confidence (**)27 April Mexico March Merchandise Trade29 April Brazil Central Bank Meeting30 April Brazil April Business Confidence (**)30 April Mexico Central Bank Meeting1 May Brazil April HSBC Manufacturing PMI1 May Chile April Copper Prices (**)1 May Peru April Consumer Prices4 May Mexico April IMEF Manufacturing PMI4 May Mexico April HSBC Manufacturing PMI4 May Mexico March Remittances5 May Chile March Economic Activity (IMACEC)5 May Colombia March Exports5 May Colombia April Consumer Prices (**)5 May Paraguay April Consumer Prices5 May Uruguay April Consumer Prices6 May Brazil March Industrial Production6 May Chile April Business Confidence (**)7 May Ecuador April Consumer Prices7 May Mexico April Consumer Prices7 May Venezuela April Car Sales (**)8 May Brazil April Consumer Prices8 May Chile April Consumer Prices8 May Mexico April Consumer Confidence8 May Paraguay March Economic Activity9 May Peru March Merchandise Trade (**)10 May Chile April Consumer Confidence (**)10 May Venezuela April Consumer Prices (**)11 May Peru April Business Confidence (**)12 May Ecuador March Economic Activity (**)12 May Mexico March Industrial Production12 May Uruguay March Industrial Production12 May Venezuela May OPEC Oil Market Report14 May Argentina April Consumer Prices14 May Brazil March Retail Sales14 May Chile Central Bank Meeting14 May Colombia March Industrial Production14 May Peru Central Bank Meeting

(*) Preliminary estimate. (**) Approximate date.

Calendar

FOCUSECONOMICS


April 2015

Economic Release Calendar

Date Country Event15 May Brazil March Economic Activity (**)15 May Colombia April Consumer Confidence15 May Peru March Economic Activity18 May Chile Q1 2015 National Accounts

(*) Preliminary estimate. (**) Approximate date.

FOCUSECONOMICS


April 2015

Notes and Statements

PUBLICATION NOTE

Consensus forecasts are mean averages of projections of economic forecasters surveyed by FocusEconomics for our monthly publication. Quarterly averages may not correspond to the annual figures due to different forecast panels.

The GDP-weighted averages for the regional aggregates refer to economies surveyed by FocusEconomics on a monthly basis, and include the following countries:

Latin America (23 countries): Argentina, Belize, Bolivia, Brazil, Chile, Colombia, Costa Rica, Dominican Republic, Ecuador, El Salvador, Guatemala, Haiti, Honduras, Jamaica, Mexico, Nicaragua, Panama, Puerto Rico, Paraguay, Peru, Trinidad and Tobago, Uruguay and Venezuela.Andean Community (4 countries): Bolivia, Colombia, Ecuador and Peru.Central America and Caribbean (12 countries): Belize, Costa Rica, Dominican Republic, El Salvador, Guatemala, Haiti, Honduras, Nicaragua and Panama, Puerto Rico and Trinidad and Tobago.Mercosur (5 countries): Argentina, Brazil, Paraguay, Uruguay and Venezuela.

Weights are based on market exchange rates and reflect the latest forecasts on GDP growth, inflation and exchange rates.

COPYRIGHT NOTE

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The LatinFocus Consensus Forecast is a monthly publication of FocusEconomics. Communications to the Editor or FocusEconomics in general should be addressed as follows:

FocusEconomics S.L.Gran Via 657E-08010 BarcelonaSpaintel: +34 932 651 040fax: +34 932 650 804e-mail: [email protected] web: http://www.focus-economics.com

DISCLOSURE STATEMENT

The LatinFocus Consensus Forecast (“Forecast”) is based on information obtained from sources believed to be reliable. FocusEconomics and the participating panelists (“Information Providers”) do not guarantee that the information supplied in the Forecast is accurate, complete or timely. The Information Providers do not make any warranties with regard to the results obtained from the Forecast. The Information Providers are not responsible for any errors or omissions, or for any injuries or damages resulting from the use of this information, including incidental and consequential damages. Recipients should not regard the Forecast as a substitute for the exercise of their own judgement. The recommendations made in the Forecast may be unsuitable for investors depending on their specific investment objectives and financial position. The Forecast has been prepared solely for informational purposes and is not a solicitation of any transaction or an offer to enter into any transaction. Any opinions expressed in this report are subject to change without notice and the Information Providers are under no obligation to update the information contained herein.

Notes

ASIA PACIFIC |

CENTRAL AMERICA |& CARIBBEAN |

EASTERN EUROPE|

EURO AREA |

LATIN AMERICA|

MAJOR ECONOMIES |

MIDDLE EAST| & NORTH AFRICA|

NORDIC ECONOMIES|

Brunei, China, Cambodia, Hong Kong, India, Indonesia, Korea, Laos, Malaysia, Myanmar, Philippines, Singapore, Taiwan, Thailand, Vietnam, Australia & New Zealand

Belize, Costa Rica, Dominican Republic, El Salvador, Guatemala, Haiti, Honduras, Jamaica, Nicaragua, Panama, Puerto Rico and Trinidad & Tobago

Bulgaria, Croatia, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, Russia, Slovakia, Slovenia, Turkey & Ukraine

Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Portugal, Slovakia, Slovenia & Spain

Argentina, Bolivia, Brazil, Chile, Colombia, Ecuador, Mexico, Paraguay, Peru, Uruguay & Venezuela

G7 countries (United States, Canada, Japan, United Kingdom, France, Eurozone, Germany & Italy); BRIC overview (Brazil, Russia, India & China); Switzerland

Algeria, Bahrain, Egypt, Iran, Iraq, Israel, Jordan, Kuwait, Lebanon, Morocco, Oman, Qatar, Saudi Arabia, Tunisia, United Arab Emirates, Yemen; South Africa

Denmark, Finland, Iceland, Norway and Sweden

FocusEconomics Consensus Forecast reports cover economic forecasts for over 1,600 unique indicators in 95 countries. Every monthly report includes the Consensus Forecast for each indicator covered. The Consensus Forecast, based on an average of the forecasts provided by the most reputable economic research authorities in the world, is the one number you can rely on to make important business decisions.

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MONETARY & FINANCIAL SECTORMoneyInflation Rate Policy Interest Rate Exchange Rate

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