ESTIMATION OF POTENTIAL GROWTH FOR ECUADOR An estimation of potential growth in Ecuador

Abstract

This document presents the estimation of potential growth for Ecuador based on the production function, which represents a methodological improvement compared to the purely statistical version and, in addition, allows generating projections of the potential for output in the medium term according to the behavior macroeconomic variables that affect its evolution. The results showed that the average potential growth of Ecuador has passed 2.4% in the nineties; at average rates of 3.7% in the first decade of 2000 and 2.7% in the last decade. According to these results, given the available population projections and under assumptions for the evolution of total factor productivity, structural unemployment and investment, the potential growth of the Ecuadorian economy would be strongly affected by the COVID-pandemic. This shock would cause the economy to recover slightly in the coming years, which implies lower rates than the previous period.