Narayan AmmachchiEcuador slipped into recession in 2024, with its economy shrinking by 2%, the first contraction after three consecutive years of growth, according to preliminary figures released by the Central Bank of Ecuador (BCE).
The downturn was fueled by a mix of domestic and external pressures. A prolonged drought triggered widespread power outages, causing significant disruptions across key sectors. The blackout-related losses alone are estimated at nearly $1.9 billion, weighing heavily on trade, manufacturing, and services.
While exports managed a modest 1.8% increase, it wasn’t enough to counterbalance the broader economic decline. The situation was further strained by a worsening security crisis, political uncertainty linked to the electoral process, and the gradual closure of oil wells in the critical Block 43-ITT area, impacting oil production, a mainstay of Ecuador’s dollarized economy.
Core economic indicators reflected the strain: household consumption dropped 1.3%, government expenditure declined 1.2%, and gross fixed capital formation — an indicator of investment in infrastructure and equipment — fell sharply by 3.8%.
Out of 20 economic sectors, only five registered growth, including agriculture, financial services and real estate. In contrast, key industries such as construction, mining and utilities posted notable declines.
Despite tax reforms and a $4 billion Extended Fund Facility from the IMF, the recession has deepened amid persistent political instability and mounting fiscal challenges.
Looking ahead, the Central Bank projects a GDP rebound of 2.8% in 2025, contingent on stabilizing the political environment, resolving the energy crisis and benefiting from favorable oil prices. Analysts stress the urgency of fiscal discipline, stronger investment inflows and robust energy infrastructure to build economic resilience and ensure sustainable recovery.
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