El Salvador Economic Outlook
Small but resilient economy:
El Salvador is the smallest country in Central America but boasts a highly dollarized and service-oriented economy. The country has struggled with sluggish long-term growth, averaging just 2–3% annually over the past two decades. However, the economy rebounded strongly from the pandemic-induced contraction of 7.9% in 2020, expanding by 11.2% in 2021. Growth has since moderated as global conditions have tightened and domestic investment has remained subdued.
Dependence on remittances:Remittances are a cornerstone of El Salvador’s economy, accounting for nearly 25% of GDP. Over 2 million Salvadorans reside in the U.S., sending back billions annually to support families and domestic consumption. This has helped cushion the economy from external shocks but has also contributed to a dependency that limits local industrial and agricultural development. The U.S. is also El Salvador’s largest trade partner, with exports largely concentrated in textiles, electronics, and agricultural products such as coffee and sugar.
Bitcoin experiment and fiscal risks:In 2021, El Salvador became the first country in the world to adopt Bitcoin as legal tender, a controversial move aimed at boosting financial inclusion and attracting investment. However, adoption has been slow, and the government’s Bitcoin purchases have led to significant losses amid market volatility. The country also faces fiscal pressures, with debt exceeding 75% of GDP. Concerns over repayment capacity have complicated access to international credit markets, though a recent bond buyback eased default fears.
Crime reduction and investment prospects:President Nayib Bukele’s aggressive security policies have dramatically reduced crime, improving business sentiment and tourism. However, governance concerns and institutional weaknesses remain a challenge for long-term investor confidence. The government has pursued infrastructure and energy projects, including a planned "Bitcoin City," but their feasibility remains uncertain.
El Salvador’s economic outlook:The El Salvadorean economy is projected to grow around 2–3% in the coming years, lagging behind regional peers. While improved security conditions and potential tourism gains provide upside risks, fiscal sustainability concerns, slow private investment, and limited industrial diversification weigh on prospects. Structural reforms and prudent fiscal management will be crucial to ensuring stable long-term growth.
El Salvador's Macroeconomic Analysis:
Nominal GDP of USD 34.0 billion in 2023.
GDP per capita of USD 5,344 compared to the global average of USD 10,589.
Average real GDP growth of 2.4% over the last decade.
Sector Analysis
In 2022, services accounted for 60% of overall GDP, manufacturing 14%, other industrial activity 21%, and agriculture 5%. Looking at GDP by expenditure, private consumption accounted for 81% of GDP in 2023, government consumption 18%, fixed investment 19%, and net exports -18%.International trade
In 2021, manufactured products made up 71% of total merchandise exports, mineral fuels 5%, food 22%, ores and metals 1% and agricultural raw materials 1%, with other categories accounting for 0% of the total. In the same period, manufactured products made up 60% of total merchandise imports, mineral fuels 16%, food 20%, ores and metals 1% and agricultural raw materials 2%, with other goods accounting for 1% of the total. Total exports were worth USD 6 billion in 2023, while total imports were USD 14 billion.Main Economic Indicators
Economic growthThe economy recorded average annual growth of 2.4% in the decade to 2023. To read more about GDP growth in El Salvador, go to our dedicated page.
Fiscal policy
El Salvador's fiscal deficit averaged 3.9% of GDP in the decade to 2023. Find out more on our dedicated page.
Unemployment
The unemployment rate averaged 6.4% in the decade to 2023. For more information on El Salvador's unemployment click here.
Inflation
Inflation averaged 1.7% in the decade to 2024. Go to our El Salvador inflation page for extra insight.
Exchange Rate
From end-2014 to end-2024 the US dollar stayed on the same level vs the U.S. dollar. For more info on the US dollar, click here.
Economic situation in El Salvador
Annual GDP growth slowed in Q3 from Q2 due to a weaker expansion in household consumption and exports, plus a decline in public spending. Turning to Q4, our panel expects the economy to have shifted into a higher gear, and available data bears out this forecast. Economic activity growth rose above Q3’s average in October–November on the back of stronger momentum in the construction and domestic commerce sectors. Moreover, both merchandise exports and remittance inflows accelerated compared to Q3 in Q4. In other news, U.S. Secretary of State Marco Rubio visited El Salvador in early February. During the visit, the two countries signed a deal on civil nuclear cooperation, and El Salvador offered to host U.S. prisoners. The Trump administration is studying the legality of this deal, which would likely entail trade benefits for El Salvador, though it would strain its fiscal position.El Salvador Economic Forecasts
Projections out to 2034.41 indicators covered including both annual and quarterly frequencies.
Consensus Forecasts based on a panel of 21 expert analysts.
Want to get insight on the economic outlook for El Salvador in the coming years? FocusEconomics collects projections out to 2034 on 41 economic indicators for El Salvador from a panel of 21 analysts at the leading national, regional and global forecast institutions. These projections are then validated by our in-house team of economists and data analysts, and averaged to provide one Consensus Forecast you can rely on for each indicator. This means you avoid the risk of relying on out of date, biased or outlier forecasts. Our Consensus Forecasts can be visualized in whichever way best suits your needs, including via interactive online dashboards , direct data delivery and executive-style reports which combine analysts' projections with timely written analysis from our in-house team of economists on the latest developments in the El Salvador economy. To download a sample report on the El Salvador's economy, click here. To get in touch with our team for more information, fill in the form at the bottom of this page.