Ecuador

Ecuador’s economy has been hit hard by the COVID-19 pandemic. In 2020, gross domestic product (GDP) contracted by more than 7%, compared to a year earlier. In 2020, based on the latest international comparable estimations the poverty rate reached 33.5%, almost ten percentage points higher than in 2019. The extreme poverty rate was 12.8%, more than five percentage points higher than a year earlier. These rates are among the highest in the Latin America and the Caribbean (LAC) region, where average poverty and extreme poverty rates were 30.9% and 10.0%, respectively, in 2020. Between March 2020 and May 2021, schools were fully closed for 39 weeks, more than the averages in LAC (26 weeks) and the Organisation for Economic Co-operation and Development (OECD) (15 weeks). Given the overall low rate of Internet use (54.1%), school closures had a negative impact on both children’s education and families due to expanded care responsibility. Ecuador entered the pandemic with increasing public expenditures on health. In the last decade, they increased by 1.2 percentage points of GDP and had reached 8.3% of GDP before the crisis. This figure is higher than in LAC (6.8%) but lower than in the OECD (8.8%). However, people’s perceptions of the quality of health services are negative. In 2020, just 44.3% of people declared being satisfied with health care, compared to 48.2% in LAC and 70.7% in the OECD. In 2020, 86.0% of citizens thought that the government was corrupt. This proportion is high, both compared to LAC (72.4%) and the OECD (58.8%).

Ecuador’s initial response to the COVID-19 crisis was very different from the majority of LAC countries. In May 2020, the government announced a comprehensive package aimed at cutting USD 4 billion from the national budget. The measures included reducing the workday for most workers, closing or merging 10 public entities, closing 11 embassies and restructuring Ecuador’s public debt. A new Humanitarian Support Law went into effect in June. The law’s primary new feature is to allow work hours and salaries to be reduced by up to 50% and 45%, respectively, for two years at a time. To help firms cope with the liquidity crisis, social security payments were postponed for 90 days, and taxes were deferred for the tourism and export sectors, as well as for micro, small and medium-sized enterprises (MSMEs), between April and June. An executive decree was issued that required about 1 200 companies that recorded a profit in the first half of 2020 to pay their income tax at least five months ahead of schedule. The country’s tax authority estimated that it would collect USD 280 million through the measure, to be distributed to 125 000 MSMEs affected by the pandemic. To sustain households income, the government introduced a moratorium on utility cut-offs due to lack of payment. A programme that handed out USD 60 over two months to 950 000 families earning under USD 400 per month was expanded to reach 2 million people as part of the package.

Ecuador has put in place many international co-operation initiatives to cope with the COVID-19 crisis. In September 2020, an agreement was approved for a new programme with the International Monetary Fund under the modality of Extended Fund Facility. This programme foresees a total of USD 6.5 billion, of which USD 4 billion were disbursed in 2020. Its main objectives are to protect the living conditions of people, expanding social protection coverage, while guaranteeing macroeconomic stability, with the implementation of a tax reform package, and the ordering of public spending. Other multilateral organisations provide support to the country with various loans. Resources have been committed by the World Bank, the Inter-American Development Bank and the CAF-Development Bank of Latin America. The loan amount totalled USD 2.32 billion by the end of 2020. Within the framework of COVID-19, the last phase (2020-21) of the EUROsociAL+ co-operation programme with the European Union supported the judiciary council to develop measures guaranteeing access to services for victims of gender-based violence. Additionally, the European Union launched a pilot exercise of Team Europe country roundtables to discuss how better to join forces and provide coherent EU support to COVID-19 management and recovery in the country.

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