Ecuador will have the second lowest inflation rate in South America in 2023, behind Bolivia, and the lowest rate in all of Latin America in 2024, according to the United Nations report.

Ecuador will likely see inflation of 3.5% in 2023, according to the report World Economic Situation and Prospects 2023, published by the United Nations (UN) Department of Economic and Social Affairs.

This places Ecuador with the second lowest inflation in South America, after Bolivia, which ranks first at 3.4%.

If Central America and the Caribbean are considered, Panama is in first place, with a projected 3% inflation rate. Like Ecuador, Panama has a dollarized economy.

The two countries with the highest inflation will be Venezuela (188.4%) and Argentina (82.5%).

Ecuador is projected to have the lowest inflation rate—2.0%— in Latin America and the Caribbean in 2024.

According to UN projections, growth in Latin America and the Caribbean will slow down in 2023. After an estimated increase of 3.8% for 2022, it will barely reach 1.4% this year.

In addition, labor markets will face a difficult situation. “Short-term reductions in poverty across the region are unlikely,” the UN report says.

Downward forecast

Annualized inflation for December, from the National Institute of Statistics and Censuses (INEC), was 3.74%. If combined with the UN projection, the country would then have a moderation in the increase in the Consumer Price Index in 2023.

José Hidalgo, Director General of the Development Studies Corporation (Cordes), believes the projection of the UN continues to be high. Cordes foresees a lower price increase of 2%.

Hidalgo explains that this year there should be a moderation in inflation because the product categories that had the most increases in 2022, such as food and non-alcoholic beverages, responded to external factors, mainly the war in Ukraine.

“These products will hardly maintain the same price rise rate this year; on that side, inflation should be lower.”

Within the food category, sweet peas were the product that increased its price the most in 2023, with 50.3% inflation, according to INEC.

Frozen fuel costs

Regarding fuels, Hidalgo says that as long as the prices of extra gasoline and diesel remain frozen, they should not have an impact on inflation. This would only vary if there were progress in the targeting of subsidies, he adds.

High octane gasoline did have an inflation of 25% in 2022, because this fuel does not have a subsidy; its price is regulated by free market.

However, it must also be considered that this gasoline only accounts for 3% of fuel consumption for the automotive sector.

By 2024, the UN forecasts inflation for Ecuador of 2%, which would bring the country closer to the rates of before 2022.

GDP Growth

The UN is projecting a growth in Gross Domestic Product (GDP) for Ecuador of 2.0% in 2023 and 2.6% in 2024.

This places its growth in the middle of the ten countries followed in South America (Argentina, Bolivia, Brazil, Chile, Colombia, Ecuador, Paraguay, Peru, Uruguay and Venezuela) in 2023 and 6th in 2024.