Ecuador’s gross domestic product expanded at the slowest annual pace in more than a year in the fourth quarter after oil exports declined.
The economy grew 6.1 percent from the year-earlier period, compared with 7.9 percent in the third quarter, taking full-year growth to 7.8 percent, the central bank said in a report on its website. From the previous three months, GDP expanded 1 percent, the slowest pace since the first quarter of 2010.
Exports declined 0.9 percent from a year earlier, the bank said. While rising oil prices may boost exports in the first quarter, lower production and a rising current account deficit may start to crimp growth and eventually lead to recession, said Michael Henderson, an economist at Capital Economics Ltd. in London.
“This pace of growth isn’t sustainable because it’s based on fiscal spending, debt and public works as private investment has stagnated,” Jaime Carrera, the head of the Fiscal Policy Observatory, said in a phone interview from Quito. “Growth this year will probably be half of what it was last year, at best.”
Ecuador, which uses the U.S. dollar as its official currency, has had limited access to foreign credit since defaulting on $3.2 billion of international bonds in 2008 and 2009. Since then, the government has relied on windfall oil sales, new taxes and at least $7.25 billion in loans from China to help finance the budget.
The Andean country, which depends on oil sales for about a quarter of government revenue, saw crude production rise 0.1 percent in the fourth quarter from the previous year, according to the central bank. Prices for its Oriente oil gained 13 percent over the same period, data compiled by Bloomberg show.
Under President Rafael Correa, the government has tapped China for $7.25 billion in loans, or 16 percent of the country’s total outstanding debt, according to Fitch Ratings. In February, he said the government is negotiating an additional $1.7 billion loan from China to help finance government spending this year. Public outlays will increase 5.4 percent in 2012, according to Finance Ministry estimates.
The expansion in construction slowed to 21 percent from 23 percent in the third quarter, according to the central bank. The industry was the biggest contributor to GDP, accounting for 2 percentage points of fourth-quarter growth.
The yield on Ecuador’s 9.375 percent bonds maturing in 2015 rose 1 basis point to 8.99 percent at 11:22 p.m. in Quito, according to JPMorgan Chase & Co. The bond’s price fell 0.03 cents to 101.17 cents on the dollar.