Summary

Overview, Inflation (CPI), Inflation (WPI), Money, Interest Rate

On 15 November, President Correa announced the government will use the 30-day grace period on the Global 2012 Bond coupon payment (US$ 30 million) scheduled for that same day. Following on the president’s decision, the country’s bonds tumbled on concern the government would default, and international credit rating agencies downgraded the country. Standard & Poor’s cut Ecuador's sovereign rating three notches, from B- to CCC- with a negative outlook. Similarly, Moody's downgraded Ecuador’s bonds from B3 to Caa1 and placed the ratings on review for further cuts. Meanwhile, Fitch announced that it would maintain its current CCC rating for the time being, pending the outcome after the grace period. Correa said the government will suspend debt payments while a legal team evaluates possible actions in international courts on foreign debt found to be “illegitimate” by the debt audit committee. According to Correa, the audit committee has found evidence that crimes were committed when the debt was contracted. Separately, the National Electoral Council announced that general elections will take place on 26 April 2013. On the economic front, the economy is likely to slow in coming quarters amid the huge correction observed in oil prices. In addition, remittances from abroad are waning, which will curb private consumption. Lower oil prices and softer domestic demand will help bring down inflation.

For the latest overview of the ecuadorian economy please visit the FocusEconomics.