Latin American Economic Outlook 2022

Ecuador

1. Recent trends

Poverty in Ecuador increased from 24.3% in 2016 to 30.6% in 2020, above the Latin America and the Caribbean (LAC) average of 26.3%, partly owing to the impact of the COVID-19 pandemic. Extreme poverty increased in that period from 7.5% to 10.8% and remains above the LAC average (8.7%). The Gini index increased from 45.0 in 2016 to 47.3 in 2020, close to the LAC average (45.3). Regarding environmental indicators, in 2019, greenhouse gas (GHG) emissions per capita were 4.2 tonnes of carbon dioxide equivalent (t CO₂e), lower than the averages for LAC (6.3) and countries belonging to the Organisation for Economic Co-operation and Development (OECD) (9.1). That year, the share of the population exposed to air pollution levels that pose risks to human health (PM2.5 at more than 10 µg/m³) was 100%, higher than 95.4% for LAC and 61.0% for the OECD. The marine protected area of Ecuador accounted for 13.3% of its territorial waters in 2021, compared to 7.3% for LAC and 18.6% for the OECD. In 2022, Ecuador created Hermandad, a new 60 000 km² marine protected area, thereby increasing the national marine protected area to 19.2% of territorial waters. On the fiscal side, environmentally related tax revenue was 0.3% of gross domestic product (GDP) in 2020, below LAC (1.0%) and OECD averages (2.1%). Total tax revenues as a percentage of GDP (19.1%) remain lower than the averages for LAC (21.9%) and the OECD (33.5%).

2. Long-term development policies for a green transition

Ecuador is particularly exposed to natural hazards associated with the El Niño phenomenon. It is also home to the Galápagos Islands’ unique biodiversity. Ecuador was the first LAC country to decree the ecological transition a state policy (Decree No. 59 of 2021). A National Climate Change Strategy 2012-2025 is currently in place and a National Plan for the Transition to Decarbonisation (2021) defines a sectoral roadmap. The Plan to Create Opportunities 2021-2025 promotes investment, conservation, and sustainable use of natural resources.

Within its mitigation efforts, Ecuador focuses on energy, transport, environmental conservation, and the circular economy. The Energy Efficiency National Plan 2016-2035 sets sectoral objectives and the Energy Master Plan 2016-2025 emphasises electricity generation from renewable sources. The National Electromobility Strategy for Ecuador (2021) was developed with the Inter-American Development Bank (IDB). In 2021, the government created two new protected areas (Mazán and Taita Imbabura), three water protection areas and a National Park. To promote circular economy, Ecuador approved a Pact for the Circular Economy (2019), a Law for the Circular Economy (2021), and the Libro Blanco de Economía Circular de Ecuador (2021). The government has made regulatory efforts to prevent environmental damage streaming from oil and mining sectors. Regarding adaptation, a National Adaptation Plan is currently under development in co-operation with the Green Climate Fund (GCF) and the United Nations Development Programme (UNDP). Current adaptation projects focus on reducing flood risk in semi-urban coastal areas (2020), adaptation to impacts on water resources (2018), and an integrated landscape management plan for ecosystem services in the Andes (2020).

With its international partnerships, Ecuador focuses on adaptation of rural areas and communities, and several economic opportunities. Within LAC, Ecuador aims to improve the adaptive capacity of Awá and Afro-descendant communities, in co-operation with Colombia and the World Food Programme (WFP) (2018), and of poor and vulnerable people in the Andean ecosystems, in co-operation with Bolivia and Peru (2020). Colombia, Costa Rica, Ecuador, and Panama agreed to construct a marine protected corridor along the Pacific. Beyond LAC, Ecuador is working on an Economic Recovery Strategy, supported by EUROCLIMA+, and promotes sustainable tourism, in collaboration with the German Import Promotion Desk. Ecuador receives support from the European Union to reactivate its food industry (CREA: Camino a la Reactivación del Ecuador Agroalimentario) and promote sustainable non-traditional exports (NEXT Ecuador). Ecuador is implementing a project for ecosystem rehabilitation, green agriculture and tourism, and renewable energies in the Galápagos Islands, with support from the GCF.

Regarding green finance, Ecuador has designed a National Climate Finance Strategy (2021) to address investment gaps in mitigation and adaptation. Ecuador uses debt-for-conservation swap mechanisms to finance projects such as the Hermandad marine reserve in Galápagos. To reverse its high levels of deforestation, Ecuador is implementing a REDD+ (Reducing Emissions from Deforestation and Forest Degradation) Action Plan 2016-2025 with financial support from the GCF.

Key indicators – Ecuador

	Ecuador		LAC		OECD
Social
	2016	2020	2016	2020	2016	2020
Extreme poverty	7.5	10.8	8.1	8.7	N/A	N/A
Poverty	24.3	30.6	25.9	26.3	N/A	N/A
Share of Internet users (% of population)	54.1	64.6	53.7	68.1	81.8	88.0
	2016	2020	2016	2020	2016	2019
Gini index	45.0	47.3	46.3	45.3	34.9	34.2
	2010	2018	2009	2018	2009	2018
Share of total population in informal households (%)	N/A	N/A	43.4	36.3	N/A	N/A
Share of total population in informal households, upper-income quintile (%)	N/A	N/A	24.5	13.6	N/A	N/A
Share of total population in informal households, lower-income quintile (%)	N/A	N/A	70.4	72.0	N/A	N/A
	2016	2019	2016	2019	2016	2019
Health expenditure (% of GDP)	7.3	7.8	6.5	6.8	8.7	8.8
SIGI index	N/A	28.9	N/A	25.4	N/A	17.5
	2015	2018	2015	2018	2015	2018
PISA score in science	N/A	N/A	411	407	489	487
Productivity and innovation
	2016	2021	2016	2021	2016	2021
Labour productivity (% of the United States)	20.5	17.8	29.0	26.6	69.9	67.2
	2016	2020	2016	2020	2016	2020
High-tech exports (% of manufactured exports)	9.2	4.3	8.4	7.2	16.5	16.2
	2016	2019	2016	2019	2016	2019
R&D expenditures (% of GDP)	N/A	N/A	0.3	0.4	1.8	2.0
Citizens’ perceptions and institutions
	2016	2021	2016	2021	2016	2021
Share of population satisfied with efforts to preserve the environment (%)	67.9	45.0	46.2	42.0	55.3	51.2
Share of population with confidence in national government (%)	47.4	41.3	34.2	39.4	40.3	46.3
Share of population that thinks corruption is widespread throughout government (%)	64.6	69.7	74.5	70.0	59.0	54.9
Share of population satisfied with the education system (%)	77.6	54.9	64.9	54.3	67.0	66.8
Share of urban population satisfied with the availability of quality health care (%)	58.0	42.1	49.2	48.9	68.2	69.5
Environment and the green transition
	2004-19		2004-19		2004-19
Loss of natural and semi-natural vegetated land (%)	0.5		1.5		1.3
	2016	2019	2016	2019	2016	2019
GHG emissions per capita excluding LUCF (t CO2e)	4.4	4.2	6.3	6.3	9.6	9.1
Air pollution – exposure to PM2.5 (annual average exposure to more than 10 µg/m3, % of population)	100	100	95.5	95.4	61.3	61.0
	2016	2019	2016	2019	2016	2020
Contribution of renewables to total primary energy supply (%)	13.4	17.5	34.2	33.4	19.7	22.9
	2016	2021	2016	2021	2016	2021
Marine protected areas (% of territorial waters)	13.1	13.3	2.5	7.3	16.5	18.6
Fiscal position
	2016	2020	2016	2020	2016	2020
Environmentally related tax revenue (% of GDP)	0.4	0.3	1.1	1.0	2.4	2.1
Total tax revenues (% of GDP)	19.9	19.1	22.2	21.9	33.6	33.5
Share of VAT (% GDP)	6.0	5.5	5.8	5.6	6.6	6.7
Share of PIT (% GDP)	N/A	N/A	2.1	2.2	7.8	8.3
Share of CIT (% of GDP)	N/A	N/A	3.3	3.4	2.9	2.7
Perception of tax evasion (%)	N/A	27.9	N/A	27.3	N/A	N/A
Debt service (% of total tax revenue)	7.8	14.7	11.3	13.0	5.6	5.2
	2016	2020	2016	2020	2016	2019
Social expenditure (% of GDP)	8.8	11.7	11.5	13.6	20.0	19.9

Note: See the Reader’s Guide for definitions and sources.

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