Economic growth in El Salvador increased by 2.5 percent in 2015. While this figure is higher than that of previous years, it is just above the forecast for the next few years. Major social protection investments have helped reduce poverty rates in recent years, which fell from 38.8 percent in 2000 to 31.8 percent in 2014, according to official data.
Private consumption drove economic growth in 2015 thanks to solid remittance flows and an increase in net exports. Remittances totaled US$4.3 billion in 2015, US$125 million more than in 2014. Exports grew 4 percent, with coffee production and maquila industries experiencing a strong recovery.
Economic growth in El Salvador reached 4.7% in 2007. However, the 2008-2009 global financial crisis had a negative impact on the country. Export revenues and remittances dropped and unemployment rates rose, while food and energy prices increased. Between 2007 and 2008, the percentage of people living in poverty increased from 34.6 percent to 40 percent. In 2009, the country’s GDP contracted by 3.1 percent.
Since the end of the civil war in 1992, El Salvador has made significant progress towards consolidating peace and democracy. The country's political transformation led to major structural reforms and macroeconomic policies that resulted in strong economic performance, with an average yearly GDP growth of around 6 percent during the 1990s, as well as a sharp reduction in poverty (nearly 27 percentage points) between 1991 and 2002.
Nevertheless, crime and violence threaten social development and economic growth in El Salvador and negatively affect the quality of life of its citizens. While a truce established between street gangs in 2012 contributed to reducing violence levels to fewer than 25 homicides per every 100,000 inhabitants, violence has been on the rise since 2015. Crime and violence make doing business more expensive, negatively affect investment decisions and hinder job creation.
In addition to these problems, El Salvador's vulnerability to adverse natural events, exacerbated by environmental degradation and extreme climate variability, also compromises the country's sustainable development and long-term economic growth. In 2011, Tropical Depression 12E hit El Salvador, affecting more than 1.4 million people and causing an estimated US$902 million in damages.
Last Updated: Sep 20, 2016