Editing Economy of Ecuador (section)

== Economic history ==
{{main|Economic history of Ecuador}}
Deteriorating economic performance in 1997–98 culminated in a [[1998–99 Ecuador banking crisis|severe financial crisis in 1999]]. The crisis was precipitated by a number of external shocks, including the [[El Niño]] weather phenomenon in 1997, a sharp drop in global [[oil price]]s in 1997–98, and international emerging market instability in 1997–98. These factors highlighted the Government of Ecuador's unsustainable economic policy mix of large fiscal deficits and expansionary money policy and resulted in a 7.3% contraction of GDP, annual year-on-year inflation of 52.2%, and a 65% [[devaluation]] of the national currency in 1999.

On January 9, 2000, the administration of President [[Jamil Mahuad]] announced its intention to [[dollarization|adopt the U.S. dollar as the official currency]] of Ecuador to address the ongoing economic crisis. Subsequent protest led to the [[2000 Ecuadorean coup d'état]] which saw Mahuad's removal from office and the elevation of Vice President [[Gustavo Noboa]] to the presidency.

US Dollar has been the only official currency of Ecuador since the year 2000.<ref>{{cite web |title=Ecuador's one and only official currency is the US Dollar |url=https://peopleplacesandthoughts.com/home/2019/5/24/ecuadors-one-and-only-official-currency-is-the-us-dollar |website=People Places and Thoughts|date=May 24, 2019 }}</ref>

The Noboa government confirmed its commitment to convert to the dollar as the centerpiece of its economic recovery strategy, successfully completing the transition from [[Ecuadorian sucre|sucre]]s to dollars in 2001. Following the completion of a one-year stand-by program with the [[International Monetary Fund]] (IMF) in December 2001, Ecuador successfully negotiated a new $205 million stand-by agreement with the IMF in March 2003.

Buoyed by higher oil prices, the Ecuadorian economy experienced a modest recovery in 2000–01, with GDP rising 2.3% in 2000 and 5.4% in 2001.<ref>{{Cite web |title=Ecuador (08/02) |url=https://2009-2017.state.gov/outofdate/bgn/ecuador/26468.htm |access-date=2022-11-01 |website=U.S. Department of State}}</ref> GDP growth leveled off to 2.7% in 2002.<ref>{{Cite web |title=GDP growth (annual %) – Ecuador {{!}} Data |url=https://data.worldbank.org/indicator/NY.GDP.MKTP.KD.ZG?locations=EC |access-date=2022-12-29 |website=data.worldbank.org}}</ref> Inflation fell from an annual rate of 96.1% in 2000 to an annual rate of 37.7% in 2001; 12.6% for 2002.<ref>{{cite web|url=http://www.indexmundi.com/ecuador/inflation_rate_(consumer_prices).html|title=Ecuador Inflation rate (consumer prices)|publisher=Index Mundi|date=30 June 2015}}</ref>

The completion of the second [[Transandean Oil Pipeline]] (OCP in Spanish) in 2003 enabled Ecuador to expand oil exports. The OCP will double Ecuador's oil transport capacity.

Ecuador's economy is the eighth largest in Latin America and experienced an average growth of 4.6% per year between 2000 and 2006.<ref>[http://es.noticias.yahoo.com/ Yahoo! Noticias España – Los titulares de hoy]. Es.noticias.yahoo.com (April 20, 2011). Retrieved on 2012-07-26.</ref> In January 2009, the Central Bank of Ecuador (BCE) put the 2010 growth forecast at 6.88%.<ref>[http://www.soitu.es/soitu/2009/01/16/info/1232133437_646823.html El Banco Central de Ecuador sitúa el crecimiento del 2008 en más del 6%]. soitu.es (January 16, 2009). Retrieved on 2012-07-26.</ref> GDP doubled between 1999 and 2007, reaching 65,490 million dollars according to BCE.<ref>[http://www.bce.fin.ec/indicador.php?tbl=pib Banco Central del Ecuador – Resumen de pib] {{Webarchive|url=https://web.archive.org/web/20121029010858/http://www.bce.fin.ec/indicador.php?tbl=pib |date=October 29, 2012 }}. Bce.fin.ec (July 11, 2012). Retrieved on 2012-07-26.</ref>
Inflation rate up to January 2008 was located about 1.14%, the highest recorded in the last year, according to Government.<ref>[http://www.indexmundi.com/ecuador/inflation_rate_%28consumer_prices%29.html Ecuador Inflation rate (consumer prices) – Economy]. Indexmundi.com (July 26, 2012). Retrieved on 2012-08-21.</ref><ref>Gill, Nathan. (January 6, 2012) [https://www.bloomberg.com/news/2012-01-06/ecuadorian-inflation-accelerated-to-three-year-high-in-2011-1-.html Ecuadorian Inflation Accelerated to Three-Year High in 2011]. Bloomberg. Retrieved on 2012-08-21.</ref> The monthly unemployment rate remained at about 6 and 8 percent from December 2007 until September 2008, however, it went up to about 9 percent in October and dropped again in November 2008 to 8 percent.<ref>[http://www.ecuadorencifras.com/cifras-inec/desempleo2.html Ecuador en Cifras]. Ecuador en Cifras. Retrieved on 2012-07-26.</ref>

Between 2006 and 2009, the government increased spending on social welfare and education from 2.6% to 5.2% of its GDP.<ref name="Economy Overview Since 2006">[http://www.cepr.net/index.php/publications/reports/ecuadors-economy-since-2007 Ecuador's Economy Since 2007 | Reports] {{Webarchive|url=https://web.archive.org/web/20150318083140/http://www.cepr.net/index.php/publications/reports/ecuadors-economy-since-2007 |date=March 18, 2015 }}. Cepr.net. Retrieved on 2012-08-21.</ref>  Starting in 2007, when its economy was surpassed by the economic crisis, Ecuador was subject to a number of economic policy reforms by the government that have helped steer the Ecuadorian economy to a sustained, substantial, and focused achievement of financial stability and consistent social policy.<ref name="Economy Overview Since 2006"/> {{vague|date=August 2012}} Such policies were expansionary fiscal policies, of access to housing finance, stimulus packs, and limiting the amount of money reserves banks could keep abroad.<ref name="Economy Overview Since 2006"/> The Ecuadorian government has made huge investments in education and infrastructure throughout the nation, which have improved the lives of the poor.<ref>[http://web.worldbank.org/WBSITE/EXTERNAL/BANCOMUNDIAL/EXTSPPAISES/LACINSPANISHEXT/0,,contentMDK:20505827~menuPK:508626~pagePK:146736~piPK:226340~theSitePK:489669,00.html América Latina y el Caribe – Ecuador – Datos destacados]. Web.worldbank.org (May 17, 2005). Retrieved on 2012-07-26.</ref>

On December 12, 2008, President [[Rafael Correa]] announced that Ecuador would not pay $30.6m in interest to lenders of a $510m loan, claiming that they were monsters.<ref name="FT081213">Mapstone, (December 13, 2008). [http://www.ft.com/cms/s/0/7170e224-c897-11dd-b86f-000077b07658.html Ecuador defaults on sovereign bonds]. [[Financial Times]]</ref>  In addition it claimed that $3.8bn in foreign debt negotiated by previous administrations was illegitimate because it was authorized without executive decree.<ref name="FT081213"/> At the time of the announcement, the country had $5.65bn in cash reserves.<ref name="FT081213"/>

In 2009, economic growth declined to 0.6% during the global recession, accompanied by falling oil prices and a decline in remittances provided by Ecuadorians living and working abroad (a major source of external revenues).<ref name=":4">{{citation-attribution|1={{Cite web|title=Ecuador: In Brief|url=https://fas.org/sgp/crs/row/R44294.pdf|last=Beittel|first=June|date=February 13, 2018|publisher=[[Congressional Research Service]]|access-date=May 5, 2020}}}}</ref> Showing signs of recovery in 2010, the economy rebounded and grew by 2.8%. After growth of 7.4% in 2011, Ecuador's growth averaged 4.5% from 2012 to 2014.<ref name=":4"/>

Some observers have attributed the high growth to a public investment boom that was fueled by high oil prices and lending from China. According to the U.S. Energy Information Administration, Ecuador was the third largest source of foreign oil to the western United States in 2014.<ref name=":4"/> However, in the middle of 2014 after the price of oil declined significantly, Ecuador's oil earnings fell.<ref name=":4"/> As a consequence, the Economist Intelligence Unit (EIU) forecast that Ecuador's economy would contract slightly in 2015, although the economy ultimately grew by less than half a percent.<ref name=":4"/> President Correa's plans to begin extracting crude oil from the Ishpingo, Tambochoa, and Tiputini field in Yasuní National Park in the Amazon to provide an economic boost did not salvage the economy from going into recession.<ref name=":4"/> In 2016, Ecuador's gross domestic product contracted by 1.6%.<ref name=":4"/>

Ecuador's economic slowdown in 2016 and the country's need for external finance were exacerbated by a deadly April 2016 earthquake.<ref name=":4"/> Ecuador's estimated $3 billion costs for reconstruction and humanitarian assistance for 720,000 people in the affected region remain a burden that the government and private sector have sought to address.<ref name=":4"/> In response, the U.S. Office of Foreign Disaster Assistance provided more than $3 million in assistance, including provisions airlifted in for 50,000 people in the earthquake-prone region and assistance with water and sanitation systems in affected areas.<ref name=":4"/> A U.N. appeal by the Office of Coordination of Humanitarian Assistance sought to raise $73 million.<ref name=":4"/> However, as of July 2016, only one-fifth of this amount had been received from donor countries, including the United States.<ref name=":4"/>

The Correa government increased a value-added tax and implemented a plan to further cut government expenditures after cutting capital expenditures by 30%.<ref name=":4"/> Despite President Correa's reluctance to ask for assistance from the International Monetary Fund (IMF), the IMF approved a request for $364 million in financial support under its Rapid Financing Instrument in early July 2016 for Ecuador.<ref name=":4"/> Additional loans from China and the World Bank to help ease the government's balance-of-payments needs were considered.<ref name=":4"/>

Ecuador's access to global financial markets also had been limited by its 2008 default on $3.2 billion in debt to global lenders.<ref name=":4"/> Consequently, the Correa government turned to nontraditional allies, such as China, for external finance.<ref name=":4"/> From 2005 to 2014, Chinese banks provided almost $11 billion of financing to Ecuador.<ref name=":4"/> The Correa government also asked China for an additional $7.5 billion in financing in early 2015 as crude oil prices—the nation's biggest export—weakened further.<ref name=":4"/> China agreed to the financing request and began to disburse funding, including nearly $1 billion in May and June 2015.<ref name=":4"/> Ecuador successfully returned to the international capital market in June 2014 with a $2 billion bond issue followed by additional smaller bond issues in 2015.<ref name=":4"/> President Moreno later discovered loans made by China over the years currently require that Ecuador pay China back with almost 500 barrels of crude oil—or roughly three years of the country's oil production.<ref name=":4"/> According to press reports, some private sector analysts question whether Ecuador will be able to meet its debt obligations given two strains on the country's public finances: the slump in oil income due to the commodity's low price and the strong U.S. dollar, which, as a result of Ecuador's dollarized economy, makes the country's exports less globally competitive.<ref name=":4"/>

Ecuador withdrew from efforts to develop a regional free trade agreement (FTA) between the United States and Bolivia, Colombia, Ecuador, and Peru in 2006.<ref name=":4"/> The United States subsequently signed bilateral FTAs with Peru and Colombia, but Ecuador showed no interest in pursuing an FTA with the United States.<ref name=":4"/> Following Venezuela's acceptance in 2012 to full membership in the South American customs union, Mercosur (Mercado Común del Sur or Common Market of the South), the leftist governments in Bolivia and Ecuador applied to move from observer status to full membership in the trade bloc originally composed of Argentina, Brazil, Paraguay, and Uruguay.<ref name=":4"/> According to some observers, out of a concern for Ecuador's struggling non-oil exporters, Correa embraced a trade agreement with the European Union (EU) as part of the EU-Andean Community Association agreement that went into effect in January 2017.<ref name=":4"/>

The [[International Monetary Fund]] approved an agreement with Ecuador in March 2019.<ref name=":3"/> This arrangement would provide support ($10 billion) for the Ecuadorian government's economic policies over three years (2018–2021 Prosperity Plan).<ref name=":3"/><ref>{{Cite web|url=https://www.imf.org/en/News/Articles/2019/02/21/pr1952-ecuador-and-imf-reach-staff-level-agreement-on-extended-fund-facility|title=Ecuador and IMF Reach Staff-Level Agreement on a US$4.2 Billion Extended Fund Facility|website=IMF|language=en|access-date=2019-04-14}}</ref>