In 1994, the general course taken by Ecuador's economy was once again primarily determined by the economic programme which had been launched two years earlier in an effort to reduce inflation and introduce major reforms in the public, external and financial sectors. Whereas in 1993 -the first year of the plan's application- the contractive conditions characteristic of stabilization policies had predominated, in 1994 the economy's growth rate picked up to over 4% per annum, resulting in an increase in the country's per capita gross domestic product (GDP). The greater robustness of the economy stemmed from a rapid increase in domestic demand together with a substantial expansion of exports. Nevertheless, since imports were also up sharply, the current account deficit widened; this shortfall was more than covered, however, by Ecuador's abundant inflows of external resources (particularly long-term funds), which included a copious inflow of direct investments made under the new terms granted to investors in the petroleum industry, as well as in other areas of production. Attractive domestic interest rates and the relative stability of the sucre were also contributing factors in the country's short-term capital inflows. As a result, a marked increase (equivalent to about 2.5% of GDP) was seen in international reserves for the second year in a row.

Related Subject(s): Economic and Social Development
Countries: Ecuador
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