El Salvador Economic Outlook
May 17, 2022After the economy grew at a softer pace in the fourth quarter of 2021, it is expected to have cooled further in the first quarter of this year. Economic activity contracted year on year in January. Meanwhile, household spending was likely constrained by softer growth in remittances and rising inflation amid the fallout of the war in Ukraine. On the other hand, annual growth rebounded in February, as industrial production, and retail and wholesale trade, swung back into expansions. Additionally, the merchandise trade deficit narrowed slightly as imports lost considerable steam, hinting at a softer drag from the external sector. In other news, the country failed to issue a bitcoin-denominated bond worth USD 1 billion in mid-March. This, combined with stalled debt relief talks with the IMF, increased commodity prices and ballooning fiscal deficit, is increasing concerns over a default.
El Salvador Economic GrowthA less favorable base effect and the fallout from the war in Ukraine will see the economy grow at a reduced speed this year. However, domestic demand should benefit from a rollback of restrictive measures and solid remittance inflows. That said, the balance of risks is skewed to the downside amid heightened debt and fiscal sustainability concerns. Our panelists see GDP expanding 2.3% in 2022, which is down 0.2 percentage points from last month’s forecast, and 2.0% in 2023.
El Salvador Economy Data
5 years of El Salvador economic forecasts for more than 30 economic indicators.
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