El Salvador Economic Forecast

El Salvador Economic Outlook

October 11, 2021

Economic growth accelerated to 24.5% year-on-year in the second quarter (Q1: +2.8% yoy), thanks to skyrocketing household consumption, fixed investment and exports. Private consumption benefited from strong growth in remittances in the quarter, while the steep rise in capital expenditure was likely influenced by improved demand and output expectations. Moreover, the sizable expansion in exports reflected a healthier external backdrop. Turning to the third quarter, momentum slowed at the outset of the period amid a less supportive base effect. The monthly economic activity index rose at a softer rate in July, and growth in remittances eased in July–August, likely tempering household spending. Meanwhile, the government tabled its draft 2022 budget on 30 September, which will see spending increase with a focus on public investment, education, and security and defense.

El Salvador Economic Growth

This year, the economy should regain some of 2020’s pandemic-induced losses. Next year, growth is forecast to cool, partly due to a less favorable base effect and as domestic and foreign demand stabilize. The outlook is clouded by weak fiscal metrics and debt sustainability concerns, as well as IMF warnings over the Bitcoin law’s potential threat to macro stability. Our panelists see GDP expanding 7.4% in 2021 and 2.6% in 2022, which is down 0.2 percentage points from last month’s forecast.

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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