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Ecuador Government Targets 4% Of GDP Fiscal Deficit In 2024

LATAM
  • According to a statement published last night, the government is targeting a 4% of GDP fiscal deficit this year, down from more than 5% in 2023, as it looks to reach a potential deal with the IMF. Government expenditure would be $35.5bn (around 29% of GDP), while GDP growth is estimated to be 0.8%, down from 3% last year.
  • These figures are consistent with previous estimates by JP Morgan, which had forecasted a 0.8% of GDP fiscal consolidation this year, supported by a series of tax increases recently passed by the Noboa administration, including a 3pp hike in VAT. JPM had been forecasting a $5.5bn, or 4.4% of GDP central government deficit, which would reduce the net financing gap this year to a manageable $2bn.
  • In JPM’s view, the government will be able to muddle through this year, avoiding a near-term debt restructuring and reducing the need of an IMF programme. That said, they still see the net financing gap potentially amounting to $4bn on average per year in the 2025-2030 period, which would make a debt restructuring attempt likely in the medium term, unless market access is regained.
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