Overview

  • Real GDP growth in El Salvador reached 2.1 percent in 2017. Agriculture, livestock, forestry and fisheries, manufacturing and mining, and commerce, restaurants and hotels accounted for about two-thirds of the observed growth. The country also benefited from an improvement in the external situation thanks to strong inflows of workers remittances. Indeed, the current deficit is estimated at 1.6 percent of GDP in the first three quarters of 2017 compared to 2.0 percent in 2016. Moreover, this improvement took place despite a deterioration of the trade deficit which in 2017 reached $4.8bn.

    Nevertheless, El Salvador continues to suffer from persistent low levels of growth. Between 2010 and 2016 real GDP growth averaged 1.9 percent, the lowest in the Central American region and lagging in comparison to lower middle-income countries. The country is expected to grow at 1.8 percent in 2018.

    The country’s low growth has translated into modest poverty reduction, and high rural poverty. According to official statistics, poverty declined between 2010 (42 percent) and 2016 (38 percent). Over the same period, extreme poverty declined from 14 percent to 10 percent. Poverty in rural areas remains higher than in urban areas, though rural poverty rates have declined faster than the urban rates between 2010 and 2016.   

    El Salvador’s low growth and rising debt-to-GDP ratios are a cause for concern. The overall deficit of the non-financial public sector is estimated at 2.3 percent of GDP in 2017, and overall debt stock to reach over 65 percent of GDP for the same year.

    In terms of political and social developments, the country has accomplished noteworthy progress on both fronts. Democracy and peace have been consolidated since the end of the civil war in 1992, and five consecutive democratic presidential elections have taken place with peaceful transitions of power. Moreover, El Salvador continues to make progress in advancing human development outcomes mainly through the expansion of access to public services. For example, in the health sector, increased access to healthcare facilities, particularly by the poor, contributed to El Salvador’s ability to reach MDG 4 (reducing under-5 mortality).

    Immunization rates have increased from 76 percent in the 1990s to 93 percent in 2016. Similarly, the share of the population with access to improved water sources increased from 79 percent to 89 percent, and the share with access to improved sanitation expanded from 56 percent to over 95 percent during the same period. In education, both access (particularly at the primary level) and literacy rates have increased, with the most significant advances in urban areas. Yet, high school dropouts remain a challenge.

    El Salvador is also becoming a more equal country. Inequality – measured by the Gini coefficient – declined by about 5 percentage points between 2007 and 2016. This reduction was driven by income growth for the poorest 20 percent in 2016, making El Salvador the most equal country in Latin America the same year, after Uruguay.

    However, crime and violence threaten social development and economic growth in El Salvador, and negatively affect the quality of life of its citizens. The crime rate reached historic record levels in 2015 with 102 homicides per 100,000. Crime and violence make doing business more expensive, negatively affect investment decisions and hinder job creation.

    In addition, the vulnerability of the country to adverse natural events, exacerbated by environmental degradation and extreme climate variability, also undermines its long-term growth trajectory and sustainability.

    Last Updated: Apr 16, 2018

  • Currently, the World Bank portfolio in El Salvador totals US$140 million and includes two projects focused on serving vulnerable groups, particularly by increased access to health and education.

    The new Country Partnership Strategy for El Salvador was approved in June 2015 and is based on two pillars: building the foundations to promote inclusive growth and promoting sustainability and resilience.

    Specific objectives include:

    ·        Building capacities to make communities safer to foster increased economic development.

    ·        Improving academic performance of secondary school students.

    ·        Increasing employability and job skills of young people.

    ·        Increasing financial inclusion.

    ·        Promoting efficient public spending and expanding fiscal space.

    ·        Building capacities to mitigate natural disasters and environmental challenges.

    Last Updated: Apr 16, 2018

  • Promoting inclusive growth:

    Through the Temporary Income Support Program (PATI), approximately 41,000 people living in poverty benefitted from temporary community jobs and technical training. The program was initially implemented in 25 municipalities and subsequently expanded to eight more in 2015. Additionally, the project supported the Ministry of Labor in the establishment of 49 employment offices to offer job placement services to beneficiaries, along with mobile employment kiosk, employment fares, and an on-line Jobs portal serving around 200,000 individuals overall.

    The Project to Strengthen Local Governments (PFGL) benefited around 3.4 million people across 262 municipalities through the development of 507 infrastructure projects in areas, such as electrification, clean water and sanitation, waste management, construction and improvement of roads, and bridges; as well as renovation of sports and recreation spaces to support violence prevention programs. In addition, the project generated around 12,987 temporary jobs through these infrastructure projects.

    Promoting sustainability and resilience:

    The Project to Improve Education Quality  is expanding the adoption of the Inclusive Full Time School Model (IFTS Model) in 29 municipalities of the country. By February 2018, the project has been supporting the construction of 31 out of 36 schools with renovated infrastructure to implement the IFTS model, the renovation of 697 school facilities (ranging from classrooms, libraries, study rooms, teacher rooms, sports and recreation spaces), and the provision of educational material and equipment to 195 schools to adopt the IFTS model. The project has benefited more than 39,000 people, including 6,259 students in grades 7 to 9 that receive more than 30 hours per week of pedagogical activities, and 1,828 teachers who have been certified in pedagogical skills such as art, physical education, and indigenous cultures, among others.

    The  Project to Strengthen the Public Health System is supporting the expansion of the Integrated Health Care Services Model in the 82 poorest municipalities of the country. Until 2017, the project had supported the construction of the first National Radiology Center for Cancer treatment and the Biomedical Laboratory, the procurement of 44 fully-equipped ambulances, the development of the first National Strategy for Chronic Diseases and the creation of the National Direction of Chronic Diseases in the Ministry of Health, and the improved management of medical waste in 30 hospitals. Since the beginning of the project, more than 1,300 pregnant women and 14,000 children under age three have been provided with maternal-child and nutrition services around 85,000 people have benefited from immunization vaccinations, and close to 8,000 chronic kidney patients have received treatment kits through the purchase of medical supplies and medicines funded by the project. The project has also supported the training of over 4,500 health personnel.  

    Last Updated: Apr 16, 2018

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LENDING

El Salvador: Commitments by Fiscal Year (in millions of dollars)*

*Amounts include IBRD and IDA commitments


PHOTO GALLERY

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Additional Resources

Country Office Contacts

EL SALVADOR +503 2526-5900
Calle El Mirador, Edificio Torre Futura, Nivel 9, oficinas 904 y 905, Colonia Escalón, San Salvador
amaso@worldbank.org
EEUU +1 202 473-1000
1818 H Street NW, Washington, DC 20433
amaso@worldbank.org
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