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Overview

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

Currently, the World Bank portfolio in El Salvador totals US$220 million and includes three projects focused on serving vulnerable groups, enhancing government and municipal efficiency, as well as improving health and education.

The International Finance Corporation (IFC) has a portfolio of commitments in El Salvador totaling US$165 million. These focus on strengthening the financial sector through improved access for micro, small and medium-sized enterprises, as well as on improving the country’s infrastructure, among others. The Multilateral Investment Guarantee Agency (MIGA) has issued US$132 million in guarantees for three active projects to support investment in the country’s financial and services sectors.

The new Country Partnership Strategy with El Salvador was submitted 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: Sep 20, 2016

Promoting inclusive growth

Through the Temporary Income Support Program (PATI), approximately 41,000 people living in poverty have 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, 40 employment offices offer job placement services to beneficiaries and organize some 40 job fairs annually.

The Project to Strengthen Local Governments (PFGL) supports 420 local projects for investment in infrastructure, such as road repair, electrification and solid waste management. To date, the project has directly created more than 11,400 temporary jobs, and its works have benefitted nearly 1.3 million people.

Promoting sustainability and resilience

The project Addressing Youth Violence through Culture and Music Learning resulted in the creation of a symphony orchestra and a youth chorus in Iberia community, one of the most violent areas in San Salvador. More than 400 young people living in violence-prone areas are participating in this initiative.

The Project to Improve Education Quality  works with 40 Integrated Full-Time Inclusive School Systems, which include 213 schools. The project has also improved infrastructure of 195 schools and will invest US$28 million to equip 46 schools that will be built or renovated with science and computer laboratories, sports facilities, classrooms and teachers’ rooms, among others. Additionally, 1,500 teachers are receiving training in an effort to improve education quality.

The Project to Protect the Human Capital of Poor Children Living in Urban Areas Threatened by Continuing Food Shortages, which is financed by the Japanese Social Development Fund (JSDF), has provided maternal-child and nutrition services to nearly 14,000 children under age three and more than 1,300 pregnant women living in poor areas of  Ahuachapán, Sonsonate, La Libertad, San Salvador, Usulután and San Miguel.

Vaccinations were purchased to immunize some 85,000 people through the Project to Strengthen the Public Health System. The project also purchased 25,000 chronic kidney disease treatment kits and installed a cobalt unit for cancer treatment, which has served 8,000 patients to date. It also has strengthened the response capacity of the Ministry of Health and has renovated 52 primary care health centers.

Last Updated: Sep 20, 2016

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

*Amounts include IBRD and IDA commitments
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