El Salvador Economic Forecast

El Salvador Economic Outlook

June 14, 2022

The economy should have lost some steam in the opening quarter of the year. However, activity gathered pace in the tail end of the period. GDP expanded at a four-month quick pace in March on the back of firm expansions in the construction, real estate and financial services sectors. Less positively, activity in the industrial sector contracted year on year. Furthermore, household spending was likely hampered by a notable pickup in inflation amid pricier commodities due to the war in Ukraine. Softening domestic demand is further hinted at by moderating merchandise import growth in the quarter. Turning to the second quarter, domestic demand is expected to have cooled further. Despite easing slightly in April, inflation remained elevated and will have weighed on private consumption. Furthermore, rising core inflation points to more persistent price pressures.

El Salvador Economic Growth

The fallout from the war in Ukraine and a tougher base of comparison will see the economy expand at a softer clip this year. Elevated inflation will dent household spending, although the rollback of Covid-19 restrictions and solid remittance inflows should support domestic demand. However, heightened debt and fiscal sustainability concerns pose risks. Our panelists see GDP expanding 2.3% in 2022, which is unchanged 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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