flag El Salvador El Salvador: Economic Outline

Economic Indicators

Between 2000 and 2019, El Salvador maintained an average growth rate of 2%. Its economic performance is closely tied to the U.S. economy, particularly through substantial remittances (26% relative to GDP) and trade interactions. According to the World Bank, El Salvador's growth was projected to reach 2.7% in 2023. Throughout the year, economic activity gained momentum, with year-on-year growth accelerating from 0.5% in the first quarter to 3.6% by the third quarter. This upswing was fueled by public investment and consumption, primarily driven by remittances, alongside a rebound in exports. The country is projected to grow on average at 2.5% between 2024-2026, nearing its potential growth. This slowdown is attributed to a deceleration in U.S. activity, which is likely to dampen remittances and tourism.

Government revenues increased by 6.8%, driven by higher current taxes from improved economic performance, alongside rising social security contributions (13.8%). However, government spending expanded by 10%, driven by both public investment (69%) and consumption (9%). Nevertheless, social spending remains among the lowest in Latin America. El Salvador’s public debt reached 76% of GDP in 2023. The 2023 pension reform has temporarily improved fiscal accounts by reducing interest payments until 2027. However, it may lead to future fiscal pressures due to increases in the minimum pension payout (data World Bank). The primary fiscal deficit is forecasted to decrease in 2024, primarily due to reduced public spending associated with the election cycle, the phase-out of subsidies (except for propane gas), hiring freezes, and the moderation of automatic wage adjustments. Debt service will remain below 2022 levels due to restructuring short-term debt into long-term instruments, lowering rollover risk. Moreover, revenues are expected to remain strong, helped by enhanced tax collection efforts. El Salvador's fiscal position remains delicate for a dollarized economy, facing liquidity challenges and limited financing options. Medium-term prospects continue to be risky without a credible medium-term fiscal consolidation plan. Following a peak of 7.2% in 2022, inflation moderated to an average of 4.1% in 2023. The fiscal deficit widened to 4.2% of GDP in 2023, up from 2.7% in 2022. Inflation is projected to continue its downward trajectory, reaching 2.1% in 2024.

The unemployment rate was estimated at 2.8% in 2023 by the World Bank (from 3% one year earlier). However, the very low official unemployment rate masks substantial underemployment, as 7 out of every 10 Salvadorans work in the informal sector. Poverty and vulnerability persist, with over a quarter of the population living on less than USD 6.85 per day and two-thirds on less than USD 14 per day. Inequality, comparatively, is among the lowest in the region. Nevertheless, the country faces ongoing structural challenges, including low productivity and human capital deficiencies stemming from issues such as malnutrition and inadequate education levels. Other social challenges the country faces include lack of formal and social education, gang violence, and a high homicide rate, especially among young adults. El Salvador's high crime rate and extreme poverty have been driving migration to other countries in the region, as well as to the United States.

 
Main Indicators 20222023 (E)2024 (E)2025 (E)2026 (E)
GDP (billions USD) 32.4935.3437.1738.8140.53
GDP (Constant Prices, Annual % Change) 2.62.21.92.02.0
GDP per Capita (USD) 5,1275,5585,8256,0616,307
General Government Balance (in % of GDP) -3.0-4.1-4.1-4.2-4.1
General Government Gross Debt (in % of GDP) 75.173.073.474.475.3
Inflation Rate (%) n/a4.42.41.81.9
Current Account (billions USD) -2.15-1.61-1.66-1.65-1.69
Current Account (in % of GDP) -6.6-4.5-4.5-4.3-4.2

Source: IMF – World Economic Outlook Database - October 2021.

Note: (e) Estimated Data


 
Monetary Indicators 20162017201820192020
American Dollar (USD) - Average Annual Exchange Rate For 1 GHS 2.190.230.220.190.18

Source: World Bank - Latest available data.

 

Main Sectors of Industry

 
Breakdown of Economic Activity By Sector Agriculture Industry Services
Employment By Sector (in % of Total Employment) 15.2 23.7 61.0
Value Added (in % of GDP) 4.7 25.2 59.6
Value Added (Annual % Change) 0.6 2.8 3.5

Source: World Bank - Latest available data.

 
Socio-Demographic Indicators 2024 (e)2025 (e)2026 (e)
Unemployment Rate (%) 5.55.55.5

Source: IMF – World Economic Outlook Database - Latest available data

 

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The Active Population in Figures

201820192020
Labour Force 2,757,1342,790,5982,496,445

Source: International Labour Organization, ILOSTAT database

 
201720182019
Total activity rate 63.08%62.85%63.15%
Men activity rate 79.78%79.36%79.59%
Women activity rate 49.01%48.93%49.28%

Source: International Labour Organization, ILOSTAT database

 

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Indicator of Economic Freedom

Definition:

The Economic freedom index measure ten components of economic freedom, grouped into four broad categories or pillars of economic freedom: Rule of Law (property rights, freedom from corruption); Limited Government (fiscal freedom, government spending); Regulatory Efficiency (business freedom, labour freedom, monetary freedom); and Open Markets (trade freedom, investment freedom, financial freedom). Each of the freedoms within these four broad categories is individually scored on a scale of 0 to 100. A country’s overall economic freedom score is a simple average of its scores on the 10 individual freedoms.

Score:
61/100
World Rank:
94
Regional Rank:
18

Economic freedom in the world (interactive map)
Source: Index of Economic Freedom, Heritage Foundation

 

Business environment ranking

Definition:

The business rankings model measures the quality or attractiveness of the business environment in the 82 countries covered by The Economist Intelligence Unit’s Country Forecast reports. It examines ten separate criteria or categories, covering the political environment, the macroeconomic environment, market opportunities, policy towards free enterprise and competition, policy towards foreign investment, foreign trade and exchange controls, taxes, financing, the labour market and infrastructure.

Score:
5.41/10
World Rank:
64/82

Source: The Economist Intelligence Unit - Business Environment Rankings 2020-2024

 

Country Risk

See the country risk analysis provided by Coface.

 

Indicator of Political Freedom

Definition:

The Indicator of Political Freedom provides an annual evaluation of the state of freedom in a country as experienced by individuals. The survey measures freedom according to two broad categories: political rights and civil liberties. The ratings process is based on a checklist of 10 political rights questions (on Electoral Process, Political Pluralism and Participation, Functioning of Government) and 15 civil liberties questions (on Freedom of Expression, Belief, Associational and Organizational Rights, Rule of Law, Personal Autonomy and Individual Rights). Scores are awarded to each of these questions on a scale of 0 to 4, where a score of 0 represents the smallest degree and 4 the greatest degree of rights or liberties present. The total score awarded to the political rights and civil liberties checklist determines the political rights and civil liberties rating. Each rating of 1 through 7, with 1 representing the highest and 7 the lowest level of freedom, corresponds to a range of total scores.

Ranking:
Free
Political Freedom:
2/7

Political freedom in the world (interactive map)
Source: Freedom in the World Report, Freedom House

 

Indicator of Freedom of the Press

Definition:

The world rankings, published annually, measures violations of press freedom worldwide. It reflects the degree of freedom enjoyed by journalists, the media and digital citizens of each country and the means used by states to respect and uphold this freedom. Finally, a note and a position are assigned to each country. To compile this index, Reporters Without Borders (RWB) prepared a questionnaire incorporating the main criteria (44 in total) to assess the situation of press freedom in a given country. This questionnaire was sent to partner organisations,150 RWB correspondents, journalists, researchers, jurists and human rights activists. It includes every kind of direct attacks against journalists and digital citizens (murders, imprisonment, assault, threats, etc.) or against the media (censorship, confiscation, searches and harassment etc.).

World Rank:
82/180

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Sources of General Economic Information

Main Online Newspapers and Portals
Última Hora (only in Spanish)
Diario El Mundo (only in Spanish)
El Salvador Times (only in Spanish)
Diario La Huella (only in Spanish)
El Diario de Hoy (only in Spanish)
La Prensa Gráfica (only in Spanish)
El Faro (only in Spanish)
El Salvador newspapers and news sites
Useful Resources
Ministry of Finance
Ministry of Foreign Affairs
Ministry of Public Works and Transportation
Ministry of Tourism
Central Bank of El Salvador
 
 

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Latest Update: May 2024