Ecuador Pres. Warns About Economy
QUITO, Ecuador (AP) _ Comparing Ecuador’s economy to a ship that has struck an iceberg, President Jamil Mahuad on Tuesday said Ecuador is in a critical situation due to a massive budget deficit.
``We have a serious crisis, the worst in 70 years,″ Mahuad, who took office five months ago, said in the annual State of the Union address to Congress.
Ecuador’s budget deficit topped $1.5 billion in 1998, he said. The tiny South American nation’s total budget was $5.2 billion.
This deficit caused Ecuador’s 1998 inflation to reach 43.4 percent, the highest in Latin America, Mahuad said.
Battered by floods and low prices for oil, its principal export, Ecuador’s economy grew by only 0.8 percent last year, he said. In 1999, the economy is expected to grow by 1.7 percent with inflation of 22-27 percent, he said.
Ecuador’s shaky banking system has been rocked by the recession and the global financial crisis. Banking authorities have taken over six banks in the past three weeks, citing a lack of liquidity.
Ecuador could also face fallout from the economic problems in Brazil, the largest economy in Latin America, which last week devalued its currency in a bid to lower the nation’s crushingly high interest rates.