El Salvador Economic Forecast

El Salvador Economic Outlook

September 14, 2021

The economy likely expanded at a rapid pace in the second quarter, accelerating from Q1’s rebound, albeit partly due to a favorable base effect. In June, economic activity continued to grow solidly, with household consumption likely receiving a boost from stronger growth in remittances in the quarter. Moreover, growth in merchandise exports and imports skyrocketed in Q2, hinting at healthier demand dynamics. Momentum seems to have carried over into Q3, with remittances continuing to grow strongly in July, albeit at a softer pace, and merchandise imports posting another robust expansion in the same month. However, in August authorities banned mass gatherings through at least 10 October, which could be weighing on activity. Meanwhile, a recently proposed constitutional reform, which aims to extend the presidential term, has sparked outcry amid accusations of authoritarianism.

El Salvador Economic Growth

The economy is forecast to return to growth this year on the back of firming domestic and foreign demand, amid the gradual easing of lockdown measures at home and abroad. That said, the outlook is clouded by weak fiscal metrics and debt sustainability concerns. Moreover, IMF warnings over the Bitcoin law’s potential threat to macro stability further cloud the outlook. Our panelists see GDP expanding 6.0% in 2021, which is up 1.0 percentage points from last month’s projection, and 2.8% in 2022.

El Salvador Economy Data

2015 2016 2017 2018 2019
Population (million)6.56.56.66.66.7
GDP per capita (USD)3,6283,7103,7953,9324,031
GDP (USD bn)23.424.225.026.127.0
Economic Growth (GDP, annual variation in %)2.42.52.32.42.4
Consumption (annual variation in %)2.81.52.12.4-  
Investment (annual variation in %)9.03.63.66.79.6
Unemployment Rate7.07.0-  -  -  
Fiscal Balance (% of GDP)-3.3-3.0-2.3-2.5-2.9
Public Debt (% of GDP)70.872.673.672.773.3
Money (annual variation in %)6.33.410.45.811.3
Inflation Rate (CPI, annual variation in %, eop)1.0-0.92.00.40.0
Inflation Rate (CPI, annual variation in %)-0.70.61.01.10.1
Benchmark Interest Rate (%)4.354.624.394.234.30
Current Account (% of GDP)-3.2-2.3-1.9-4.7-2.1
Current Account Balance (USD bn)-0.8-0.6-0.5-1.2-0.6
Trade Balance (USD billion)-4.8-4.4-4.8-5.9-6.1
Exports (USD billion)5.55.45.85.95.9
Imports (USD billion)10.39.810.611.812.0
Exports (annual variation in %)3.9-1.66.32.50.6
Imports (annual variation in %)-2.1-4.57.611.91.6
International Reserves (USD)2.72.93.33.43.9
External Debt (% of GDP)66.468.568.867.0-  

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