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- GDP (PPP):
- $183.6 billion
- 0.0% growth
- 2.5% 5-year compound annual growth
- $11,109 per capita
- Inflation (CPI):
- FDI Inflow:
Ecuador’s economic freedom score is 48.5, making its economy the 165th freest in the 2018 Index. Its overall score has decreased by 0.8 point because of notably lower scores for fiscal health, government integrity, labor freedom, and property rights. Ecuador is ranked 28th among 32 countries in the Americas region, and its overall score is below the regional and world averages.
President Lenín Moreno’s administration inherited a dismal legacy from its populist and repressive predecessor, which extended the government’s reach throughout the economy, generating economic uncertainty and discouraging private investment. The private sector has struggled to operate and compete with a hugely bloated public sector in what has become a restrictive entrepreneurial environment. Pervasive corruption undermines the rule of law and weakens property rights. The more restrictive trade regime reduces competitiveness and erodes productivity. The underdeveloped and state-controlled financial sector limits access to credit and adds costs for entrepreneurs.
The “Republic of the Equator” initially gained independence from Spain in 1830. Former two-term President Rafael Correa’s vice president, socialist Lenín Moreno, was narrowly elected to succeed him in April 2017 amid widespread charges of electoral fraud and last-minute infrastructure spending by Correa. Ecuadorian law prevented Correa from seeking another term, but constitutional changes that he made while in office make him eligible to succeed Moreno in 2021. The world’s largest banana exporter, Ecuador continues to be a major narco-trafficking transit country. Its dollarized economy depends substantially on petroleum, which accounts for more than half of export earnings and approximately one-quarter of public-sector revenues. Nevertheless, more than one-quarter of the population still lives below the poverty line.
Lax enforcement against intellectual property infringement remains a problem. Protection of real property rights is weak. The judiciary’s systemic weakness and susceptibility to political and economic pressures, along with a lack of investigative capacity, contribute to an environment of impunity. Persistent corruption is fueled by cronyism and enabled by government persecution of media investigative reports about it.
The top personal income tax rate is 35 percent, and the corporate tax rate is 22 percent. Other taxes include value-added and inheritance taxes. The overall tax burden equals 18.8 percent of total domestic income. Over the past three years, government spending has amounted to 39.8 percent of total output (GDP), and budget deficits have averaged 5.7 percent of GDP. Public debt is equivalent to 29.2 percent of GDP.
The cost of doing business is high because of an unstable regulatory environment and the weak rule of law. Cumbersome labor laws inhibit worker mobility. There is an abundance of semiskilled and unskilled workers who earn low wages. Although dollarization generates a modicum of monetary stability, the government continues to impose price controls and fund subsidies despite significant budgetary strains caused by low oil prices.
Trade is moderately important to Ecuador’s economy; the combined value of exports and imports equals 39 percent of GDP. The average applied tariff rate is 5.6 percent. Nontariff barriers significantly impede trade. Government openness to foreign investment is below average. Although the banking sector has grown, state meddling constrains overall growth in financial services. The number of nonperforming loans has been increasing.