Overview

After signing a peace agreement in 1992, this small, densely populated country, managed to emerge from a bitter civil war in the 1980s, during which an estimated 75,000 people died.

Since the end of the conflict, El Salvador has made significant progress towards consolidating peace and democracy. The country's political transformation led to major structural reforms and stable macroeconomic policies that resulted in strong economic performance (an average yearly growth of around 6%) during the 1990s.

Poverty levels in the country declined significantly between 1991 and 2002 (about 27 percentage points), with extreme poverty dropping by half over the same period. There were also important social advances, as infant and maternal mortality rates were reduced and school enrollment and access to reproductive health and water services increased.

After an average economic growth of 2% during the last 15 years, GDP growth in El Salvador reached 4.7% in 2007. However, the effects of the global financial crisis in 2008 resulted in a drop in exports and remittances, higher levels of unemployment and rising food and energy prices.

 Between 2007 and 2008, the percentage of people in poverty increased from 34.6% to 40%. However, in 2012, the poverty rate was 34.5%, a figure that decreased to 28.9% in 2013, according to the latest survey of the Ministry of Economy of El Salvador.

The Salvadoran economy experienced a GDP contraction of 3.1% in 2009, and in response to the effects of the economic downturn, the Government formulated the Anti-Crisis Plan, with a stimulus package of nearly US$600 million that included measures to mitigate the effects of the crisis and pave the way for recovery covering four broad areas:

  • Income and Employment Protection Program
  • Universal Social Protection System
  • Public Finances Strengthening
  • Construction of State Policies

The Salvadoran economy has begun to recover at a slow pace: it registered a 2% growth in 2011; a 1.6% in 2012 and a 1.9% in 2013. According to official data the Salvadoran economy is estimated to grow by 2.1% in 2014. However, there are still many challenges.

Crime and violence threaten social development and economic growth in El Salvador and negatively affect the quality of life of its citizens. After a sharp and sustained increase in the levels of violent crime since 2000, the murder rate peaked at 71 homicides per 100,000 inhabitants in 2009, declining slightly to 69 in 2011.

An ongoing truce between rival street gangs has further reduced homicide rates in El Salvador since the pact began in March of 2012 to 39,6 homicides per 100,000 inhabitants by the end of 2013. 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 $902 million in damages and losses.

 

Last Updated: Apr 10, 2014

Currently, the World Bank lending portfolio in El Salvador comprises US$290 million in commitments and includes five projects focused primarily on serving vulnerable groups; enhance government efficiency, protect the environment and expanding opportunities for all. The World Bank also disbursed $50 million for the Disaster Risk Management Program for natural disasters.

In 2009 the World Bank Executive Board approved a Country Partnership Strategy (CPS) covering the period from 2010 to 2012 with a proposed $650 million lending program, technical assistance and analysis to support Government efforts to reduce poverty. After the 2011 Progress Report, the current CPS period was extended to this year.

The CPS focuses on the following aspects:

Strengthen fundamentals for economic recovery by addressing the macroeconomic and institutional vulnerabilities.

Improve the provision of social services for vulnerable groups.

Expand economic opportunities, particularly for the poor.

The current World Bank projects in El Salvador include:

Income Support and Employability Project

This $50 million operation assists the Government’s Temporary Income Support Project (PATI), which provides temporary income support, training services and job placement for poor people in urban areas, improving opportunity access to the labor market.

Local Government Strengthening Project

With $80 million in financial support from the World Bank, this project aims to improve the administrative, financial and technical processes, systems and capacities of the 262 local governments to deliver basic services in the medium and long term, as well as improve the disaster risk management.

Education Quality Improvement Project

This $60 million project will assist public schools in 29 municipalities to adopt the Inclusive Full Time School model, in order to increase access, retention and graduation rates for secondary students. More than 41,000 secondary students in El Salvador will have access to better quality education.

Fiscal Management and Public Sector Performance Technical Assistance Loan

The objective of this $20 million project is to strengthen the institutional capacity of government processes and agencies to increase the effectiveness and efficiency of revenue and expenditure management, and enhance accountability and transparency in the public sector.

Strengthening the Public Health Care System

The objective of this $80 million project is to strengthen El Salvador’s Public Health Care System, increasing service coverage for the 92 poorest municipalities in the country and providing better access to quality health services for 2.1 million Salvadorans.

 

Last Updated: Apr 10, 2014

Social Protection

Through the Income Support and Employability Project more than 30,000 people in situation of poverty or vulnerability received benefits in exchange for their participation in a community activity and training. The program has taken place in 25 municipalities and is expected to expand to other 8 in 2014.

Violence prevention

The project Addressing Youth Violence through Cultural and Music Learning resulted in the creation of a symphonic orchestra and a youth chorus in the Comunidad Iberia, one of the most violent areas in San Salvador. So far more than 400 young people are participating in this initiative.

Secondary Education Project

This project improved the quality and efficiency of private and public secondary schools in order to upgrade the quality of entrants to the labor market and to increase the country’s competitiveness in the global market. Secondary enrollment rose to 46.1% between 1998 and 2005, exceeding the planned target of 40%.

Response to earthquakes in the area of health

The Earthquake Emergency Recovery & Health Services Extension Project allowed the construction, rehabilitation and improved operations of six hospitals (Cojutepeque, San Rafael, San Vicente, San Miguel, Zacatecoluca and Usulutan). The project also improved the provision of health services for more than 636,000 people, especially in areas affected by earthquakes and in poor areas in the northern region.

 

Last Updated: Apr 10, 2014


LENDING

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

*Amounts include IBRD and IDA commitments