El Salvador: Better Economic Outlook

According to the IMF, in the first half of the year, the Salvadoran economy increased above the estimated potential, the inflation remained low and the fiscal position was better than expected.

Tuesday, November 20, 2018

From the International Monetary Fund statement:

An International Monetary Fund (IMF) team, led by Ms. Alina Carare, visited San Salvador from November 12 to 16, 2018 to discuss recent economic and financial developments. At the conclusion of the mission, Ms. Carare made the following statement:

“The Salvadorian economy is doing well. Helped by strong domestic demand, the economy grew by 2.8 percent in real terms in the first half of 2018, almost ½ percentage point above the country’s estimated potential. Inflation remained low and the fiscal position was better-than-expected. Banks appear solid and credit growth is picking up.

“The buoyant economy together with fiscal measures (gains from the tax amnesty and savings from the pension reform) will lead to an improvement in the primary balance in 2018, compared to 2017. Those savings will be eroded by the high and rising interest bill. The stock of public debt reached around 70 percent of GDP at end September 2018.

“Furthermore, in 2019 output growth is expected to plateau, as the global economy starts slowing down. Against a background of further tightening of global financial conditions—rise in interest rates and worsening of borrowing terms—the looming public financing gap of US$ 1.4 billion (more than 5 percent of GDP) poses downside risks to the overall economic outlook. To mitigate these risks, and to bolster the economy’s resilience to shocks, continued fiscal discipline and prompt political agreement to secure public financing are paramount. In particular, we would encourage the Legislative Assembly to swiftly pass the 2019 budget, the pre-financing strategy for the quinquennium 2019-2024, the revised fiscal responsibility law and the electronic invoicing law. In addition, we would support the saving of any higher-than-expected revenues by the government should the fiscal package be approved, and financing secured on a timely basis.

“The team welcomed the authorities’ plans to strengthen the fiscal position without harming growth, the progress made in implementing structural reforms to improve competitiveness, and the strong efforts to improve governance and security. Regarding fiscal discipline, the proposed revision of the fiscal responsibility law is a step in the right direction. As in best practices, the revised law limits tax evasion, and aims at further curtailing government spending. The law should ensure that debt is put firmly on a declining path. We started a dialogue with presidential candidates and the current administration to identify feasible measures that would ensure a further improvement in the fiscal position and help the economy as well.

“On the structural front, the authorities have made progress in reducing red tape by launching the National Registry of Procedures and by submitting the draft law of regulatory simplification to the Legislative Assembly. El Salvador’s trade and competitiveness are expected to improve with the completion of the customs union with Honduras and Guatemala by the end of November. In terms of governance and crime, the Attorney General has significantly strengthened investigation and prosecution activities to ensure a transparent use of public funds. The continued implementation of the “El Salvador Seguro Plan” by the current administration and its partners has led to increased public security. We recommend sustained efforts in these directions, especially on governance.

“The current economic environment offers an excellent opportunity to foster strong private-sector-led growth. Progress in structural reforms will help improve competitiveness and attract foreign direct investment. Continued fiscal consolidation will ensure that public debt declines, and along with it, sustainable growth that future generations will enjoy.”

The mission met with Governance Secretary Roberto Lorenzana, Technical and Planning Subsecretary Alberto Enriquez, Finance Minister Nelson Fuentes, Central Bank President Oscar Cabrera, Superintendent of the Financial System Ricardo Perdomo, Minister of Justice Mauricio Ramirez, other senior government officials, members of congress, presidential candidates, and representatives of the private sector. The IMF team greatly appreciates the frank and productive discussions and the warm hospitality of our Salvadoran counterparts.

Do you need to keep track of the key economic indicators in Central America?

Request more information about our Regional Economic Monitor.








this site is protected by reCAPTCHA and Google's privacy policy and terms of service.
Need assistance? Contact us
(506) 4001-6423


More on this topic

Business Environment Improves in El Salvador

November 2019

For the IMF, the Salvadoran authorities are dealing firmly with crime and corruption and are beginning to improve the business environment in order to support economic growth.

In 2019, real GDP growth is expected to be 2.5% as a result of the solid confidence of the business sector, reported the International Monetary Fund (IMF) after its visit to El Salvador.

IMF with Good Outlook for the Banking Sector

May 2019

For the international organization, El Salvador's banking sector is well capitalized and is optimistic about the recent progress made in the area of cross-border banking supervision.

In order to further enhance the resilience of the banking sector, the authorities were encouraged to pass the bank resolution law, strengthen the emergency liquidity assistance framework, and ensure full compliance with the risk-based supervisory framework, among others, of the International Monetary Fund (IMF) after concluding its last visit to the country.

Panama as Seen by the IMF, June 2018

June 2018

Due to the recent strike in the construction sector, the entity has reduced projections of economic growth for this year from 5.6% to 4.6%.

However, recovery from the impact of the strike and the entry into operation of a large copper mine will lead to an upward revision of around one percentage point in the growth projection of 5.8% for 2019.

Better Prospects for Honduras

October 2015

The IMF highlighted the progress made in the fiscal area and projects low inflation and economic growth of 3.6% for 2016.

From a press release issued by the IMF:

An International Monetary Fund (IMF) mission, led by Roberto Garcia-Saltos, visited Tegucigalpa on September 24 to October 6 to conduct the second review of Honduras’ Fund-supported program.

 close (x)

Receive more news about Economics

Suscribe FOR FREE to CentralAmericaDATA EXPRESS.
The most important news of Central America, every day.

Type in your e-mail address:

* Al suscribirse, estará aceptando los terminos y condiciones


Professional ink refill franchise for sale

Ink and toner refills with latest generation machinery exclusively for the franchisee in Central America, investment opportunity with fast return.
Ink and toner refills with latest generation machinery...

Stock Indexes

(Apr 6)
Dow Jones
-5.60%
S&P 500
-5.10%
Nasdaq
-5.64%

Commodities

(Jan 27)
Brent Crude Oil
55.77
Coffee "C"
126.65
Gold
1,847
Silver
25.475