El Salvador Economic Forecast

El Salvador Economic Outlook

November 10, 2020

Economic conditions likely remained downbeat in Q3, despite improving somewhat, after Q2’s record GDP contraction due to the fallout from the pandemic. Economic activity continued to shrink in August, albeit at the softest pace since March, which suggests that the downturn has bottomed out. Moreover, exports grew for the first time in seven months in September, while imports decreased at the softest pace in six months, hinting at a pickup in domestic demand. Meanwhile, remittances continued to climb from April’s collapse through September, as employment levels improved in the U.S. However, Covid-19 cases continued to rise in September–October, which could weigh on activity in Q4. In brighter news, in late October, the OPEC Fund for International Development approved a USD 35 million public sector loan to support small- and medium-sized businesses hit by the pandemic.

El Salvador Economic Growth

The economy will contract notably this year due to the blow dealt by the health crisis, although it should begin to recover somewhat next year. However, downside risks cloud the outlook: Elevated debt amid lower government revenues will enlarge the fiscal deficit, leaving less room for authorities to implement support measures, while uncertainty over the pandemic still lingers. Our panelists see GDP expanding 3.8% in 2021, which is up 0.4 percentage points from last month’s projection, and 3.0% in 2022.

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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