Ecuador’s economy expanded around 1% in real terms in 2018, reflecting various efforts to re-establish a competitive private sector-driven economy. Specific competitiveness measures have helped ease labor market rigidities, improved the legal framework for investors and facilitated trade. Moreover, the new Productive Develop- ment Law, approved by the National Assembly in June 2018, contained improvements to the fiscal policy framework that helped address fiscal imbalances. As a result, and with the impact of higher oil prices, the primary fiscal deficit narrowed to almost zero as a percent of GDP, from 2.4% in 2017. The pick-up in domestic demand last year despite US dollar appreciation (Ecuador dollarized in 2000) resulted in inflation accelerating around 1% by the end of 2018. Higher oil prices helped the authorities to strengthen the external position by building up foreign exchange reserves. However, despite a pick-up in exports in the first half of last year (in-line with rising oil prices), the current account deficit widened slightly to 0.5% of GDP because of a stronger rise in imports (reflecting stronger domestic demand).


Economic conditions in Gabon are slowly improving, reflected in real economic growth estimated at 1.2% in 2018, up somewhat compared to the


year before. The slow pace of growth partly reflects a decrease in oil produc- tion (oil accounts for around 30% of the economy). Moreover, despite the strong performance of the mining, agriculture, and timber sectors, non-oil growth was weak owing to lower public investment compared to 2017. Fiscal performance in 2018 was mixed. Revenues were higher than anticipated, helped by increased tax and duties linked to the rise in oil prices. Expenditure was also higher than expected, partly due to the cost of legislative elections held in October 2018. The annual average inflation rate was around 2.8%, little changed from 2017, owing to pressure on food and fuel prices following implementation of the indexation mechanism for retail fuel prices and the elimination of related subsidies. Further progress was seen in the significant narrowing of the current account deficit to around 1.6% of GDP in 2018, helped by higher oil prices along with import compression reflecting lower public investment.


Indonesia’s economy continued to perform well during 2018 with real GDP estimated to have expanded more than 5%, sustaining a similar level of growth to recent years. Strong growth was driven largely by higher exports and investment and supported by prudent macroeco- nomic policies, improved global growth and commodity prices, and sustained


efforts to strengthen competitiveness. Annual inflation remained comfortable in 2018 at an estimated 3.4% due to broadly stable food and administered prices, and a slightly negative output gap. Low inflation helped keep domestic debt servicing low, which supported the authorities’ fiscal policy stance that was geared toward rebuilding fiscal buffers with efforts to rebalance the budget towards social spending and investment. The strength of the economy and balanced policy environment helped sustain a low fiscal deficit last year. Meanwhile, the current account deficit was contained at around 2.4% of GDP in 2018 thanks to improving terms of trade and the effect of higher oil prices, despite increased imports driven by stronger domestic demand for goods and services.


The economic environment in Iran deteriorated during 2018. The economy is estimated to have contracted 1.5% in real terms1 partly due to the widespread effect of renewed US sanctions that took effect in November (following the withdrawal of the US from the Joint Comprehensive Plan of Action in May 2018). Oil production decreased noticeably in the second half of the year, reflecting the impact of sanctions and


1 Iran’s fiscal year runs from March to March, but this summary uses calendar years for ease of comparison.


1.2 OPEC reference basket price (US$/b) and world oil demand (mb/d)


85 80 75 70 65 60 55


Dec. 2017 ORB (lhs) Mar. 2018 Demand (rhs) Jun. 2018 Sep. 2018 Dec. 2018


100.5 100.0 99.5 99.0 98.5 98.0 97.5 97.0


Source: OPEC Monthly Oil Market Reports


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