Ecuador Inflation

The Daily Brief – Ecuador Inflation

In yet another positive development, in a long string of strong economic showings on the part of the Ecuadorian economy, the latest figures show inflation in Ecuador easing down to 2.39%.  The consumer-price index showed a month-on-month decrease of 0.02%, from the previous month.  Current Central Bank forecast numbers place full year Ecuador inflation numbers at 3.9% for 2013.  The current trend appears to suggest that even those optimistic projections may be exceeded, on the positive side.

Even the 3.9% current 2013 inflation prediction compares favorably to the 4.16% shown in 2012 and the 5.41% for 2011.  The stark contrast of current inflation rates, compared to the pre-Correa Administration era, shortly after the economic collapse of 1998 is staggering.  Inflation rates for Ecuador once looked like this:

Ecuador has made dramatic strides in getting its financial house in order and spurring controlled and sustainable economic growth.  This has led to a sharp increase in consumer confidence and a renewed interest in increased economic investment activity, both from domestic and foreign institutional and commercial sources.

The current plan by the President Correa Administration is to continue to spur domestic output and consumption, while carefully keeping a lid on the “inflation monster”.  The most recent statistics as presented here, seem to favorably suggest that this current policy initiative is working well.  The only dark clouds on the horizon are capitalist initiatives which threaten current subsidies for propane gas and gasoline.  The necessary gradual weening of the populace from a subsidized environment, while economically healthy and necessary, does raise the specter of whether such changes can be initiated without producing an inflation spike.  At present, the consensus seems to be that the subsidies will be diminished over time, with heavy propane and gasoline consumers bearing a decisively heavy percentage of the burden, in the early stages of the subsidy withdrawal process.

Still, at present, it is too early to tell what impact, if any, the potential subsidy terminations will have on the broader inflation numbers. For now, what is certain, is that the current trend under the Correa Administration is exceedingly positive, with a forward looking positive rating, as well.  Ecuador has come a long way towards reigning in inflation and establishing a nation predicated on financial stability.

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