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- GDP (PPP):
- $159.0 billion
- 4.2% growth
- 4.2% 5-year compound annual growth
- $10,080 per capita
- Inflation (CPI):
- FDI Inflow:
Ecuador’s economic freedom score is 49.2, making its economy the 156th freest in the 2015 Index. Its overall score is 1.2 points higher than last year due to significant improvements in freedom from corruption, the control of government spending, and monetary freedom. Scores in five other economic freedoms declined. Ecuador is ranked 25th out of 29 countries in the South and Central America/Caribbean region, and its overall score is far below world and regional averages.
Ecuador’s improvement of 2.1 points over the past five years masks long-term deterioration in economic freedom since scoring began in 1995. Once considered “moderately free,” Ecuador has fallen into the ranks of the “repressed” economies since 2010.
Ecuador continues to lag significantly in promoting the rule of law and has yet to establish a judicial system that is free from political interference. Deep petroleum reserves have enhanced financial growth, and Ecuador returned to the bond market in 2014. However, a history of fiscal incompetence, along with a restrictive investment climate, continues to suppress overall economic freedom.
President Rafael Correa was re-elected in 2013 for the third time, having amended the constitution in 2008 to ease presidential term limits. The ruling Alianza PAIZ has proposed legislation to abolish the limits altogether, which would allow Correa to run again in 2017. Other constitutional amendments passed in 2011 increased Correa’s control of media and reduced the judicial system’s independence. The Inter-American Human Rights Commission has criticized Ecuador for restricting freedom of the press. Ecuador is part of the Bolivarian Alliance for the Americas (ALBA), led by socialist Venezuela, and has strengthened its relations with Iran and China. By 2013, Ecuador was sending most of its oil exports to China. Ecuador returned to international credit markets in June 2014 for the first time since its $3.2 billion default in 2008. Approximately one-third of the population lives below the poverty line.
The government’s anti-corruption agency reported in 2013 that cronyism, impunity, excessive discretion, fragmented anticorruption policies, lack of correspondence between offenses and sanctions, and collusion were among the factors that have favored the persistence of corruption in Ecuador. Judicial processes are slow and subject to political influence. The government decriminalized intellectual property rights violations in 2014.
The top individual income tax rate is 35 percent, and the top corporate tax rate is 22 percent. A lower rate of 12 percent applies to profits that are reinvested. Other taxes include a value-added tax and an inheritance tax. Overall revenue equals 19.4 percent of domestic income. Public expenditures are equivalent to 40.4 percent of the overall domestic economy, and public debt equals 24 percent of GDP.
Commercial laws are applied inconsistently, and launching a business takes about two months and 13 procedures. Completing licensing requirements takes over 100 days. Job-tenure regulations create a disincentive for new hiring, and employers resort to short-term contracts. Although dollarization produces a modicum of monetary stability, the state makes extensive use of subsidies and price controls.
Ecuador’s average tariff rate is 4.3 percent. Additional barriers to trade include export taxes and government promotion of “import substitution.” Foreign investment in several sectors of the economy is restricted. The financial system lacks efficiency and depth, and capital markets are underdeveloped. Lack of financing options hampers private-sector growth, and the number of nonperforming loans has increased.