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
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