Ecuador

The authorities face a difficult situation. Wage increases have outpaced productivity growth over the past decade which, has led to a deterioration in competitiveness. This has been exacerbated by a strong U.S. dollar—Ecuador’s economy is fully dollarized—leaving the real exchange rate overvalued. Public debt is high and rising, the government faces sizable gross financing needs, and international reserves are precariously low. The recent volatility in oil prices and tighter global financial conditions have exacerbated these strains.