El Salvador Economic Outlook
After annual growth slowed in Q4 last year, the early signs for Q1 are mixed. In January–February, economic activity slowed compared to the Q4 average. That said, remittances growth accelerated and inflation moderated over Q1, likely supporting private consumption. Moreover, exports rebounded over the same period. In other news, in May, President Bukele signed into law a bill that eliminates for 15 years all taxes on companies developing new technology, boding well for investment ahead. In April, the government appointed ex-IMF official Alejandro Werner as an advisor for its talks with the Fund. The country’s bonds rallied on the news, but a deal with the IMF seems unlikely in the near term, given the government’s heterodox policies.
El Salvador Inflation
Inflation slowed to 5.4% in April (March: 6.1%). Lower price pressures for food and transport drove the reading. Cooling demand and dollarization will keep prices in check this year. That said, spikes in commodity prices pose an upside risk.