El Salvador Economic Forecast

El Salvador Economic Outlook

May 17, 2022

After 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 Growth

A 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

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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