Overview

  • Economic growth in El Salvador reached 2.4 percent in 2016. This growth was mainly driven by external factors, including a significant decline in oil imports, which fell by US$262 million, and remittances, which increased by US$306 million from 2015 to reach US$4,576 million (or 17.1 percent of GDP). The country’s economic performance also benefited from an improvement in the trade balance, as both imports and exports fell, but the decline in imports was more marked.

    Yet, El Salvador continues to suffer from persistent low levels of growth, which between 2010 and 2016 only averaged 1.9%. This sluggish performance has made El Salvador the slowest growing economy of Central America in recent few years. The country is expected to grow by 2.3% in 2017.

    The country’s low growth has translated into persistently high poverty levels, and increased urban poverty in recent years. According to WB data based on national poverty lines, 41 percent of households lived below the poverty line in 2015 including 10 percent which lived below the extreme poverty line. These figures represent an increase in poverty of about 4 percentage points compared to the previous year, driven mainly by an increase in urban poverty resulting from the growing cost of living in the urban areas.

    An additional element that is becoming increasingly important is the country’s fiscal situation, which has progressively deteriorated in recent years. The fiscal deficit is currently around 2.8% of GDP while debt is expected to reach 61.3% of GDP by the end of 2017, almost one percentage point higher than in 2015. The rising debt-to-GDP ratio, together with the low growth performance, has negatively impacted El Salvador’s debt profile.

    In terms of political and social developments, the country has accomplished significant 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 on the social front thanks in part to active policies which have expanded 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 also 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.

    Inequality – measured by the Gini coefficient –also declined by about 4 percentage points between 2006 and 2015. This reduction was driven by income growth for the poorest 20 percent, making El Salvador the most equal country in Latin America in 2015 after Uruguay.

    But 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 39 homicides per every 100,000 inhabitants, violence has been on the rise since 2014. 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.

    Last Updated: Oct 10, 2017

  • 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: Oct 10, 2017

  • 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 Labour 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. The Project has finished the construction of 10 full time inclusive schools, renovation of 359 school facilities (ranging from classrooms, libraries, study rooms, teacher rooms, sports and recreation spaces), and is currently launching 16 new school infrastructure projects for 2017. Thus, the project has benefited around 16,000 students from these education centers with new facilities, and learning materials to support their learning capacities. In addition, it is supporting the improvement of pedagogical skills of around 1,997 teachers from the public education system through a series of certified trainings.

    The  Project to Strengthen the Public Health System has supported the expansion of an Integrated Health Care Services Model in the 82 poorest municipalities of the country. Until 2016, a total of 21 hospitals, 52 community health units and 19 administrative offices have been benefited through different actions, including infrastructure renovation projects, replenishment of medicines and medical supplies, goods and services (i.e. ambulances), implementation of bio-waste management systems, and staff training to nearly 900 people. More than 1,300 pregnant women and 14,000 children under age three have been provided with maternal-child and nutrition services since the project started. Also, more than 85,000 people have benefited from immunization vaccinations and some 8,000 chronic kidney patients have received treatment kits through the purchase of medical supplies and medicines funded by the project. 

    Last Updated: Oct 10, 2017

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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