El Salvador Economic Forecast

El Salvador Economic Outlook

September 15, 2020

The economy is set to have contracted in the second quarter, due to Covid-19 containment measures and the damage caused by tropical storms. Economic activity declined again in June, with construction, trade, transport and storage still the most affected sectors. However, the drop was much softer than in April and May, which could signal the economy is stabilizing. On another brighter note, remittances picked up in June after April’s slump, due to the recovery in the U.S. labor market. Turning to Q3, the whole economy has now reopened, while international travel will resume on 19 September. Moreover, although exports still decreased in July, the fall was much more moderate than in June, while imports also softened their drop, suggesting an improvement in both foreign and domestic demand. However, U.S. aid to El Salvador expired in early September, and it is not yet clear whether it will be extended.

El Salvador Economic Growth

The outlook in H2 remains uncertain as it depends closely on the evolution of the virus; the reopening of the economy will support activity as long as cases don’t spike. However, household spending is likely to remain downbeat as high uncertainty persists. Our panelists see GDP falling 5.7% in 2020, which is unchanged from last month’s forecast, before growing 3.2% in 2021.

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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