Overview

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Context
Strategy
Results

The smallest country in Central America, El Salvador has a population of 6.4 million (plus over 1.5 million Salvadorians living abroad) and is one of the most densely populated countries, ranking in the 83rd percentile worldwide in terms of population density.
GDP growth in El Salvador reached 2.3 percent in 2019, but the country has been suffering from persistently low levels of economic growth. Annual GDP growth has exceeded 3 percent only twice since 2000 and averaged just 2.3 percent in recent years.
The country had recently registered a moderate poverty reduction. The poverty rate (based on a US$5.5 per person per day poverty line) declined from 39 percent in 2007 to 29 percent in 2017. Extreme poverty (US$3.2 per person per day) also declined from 15 percent to 8.5 percent over the same period.
El Salvador also became a more equal country in recent years, with the second-highest level of equality in Latin America and the Caribbean, after Uruguay, on par with the world average. Inequality –measured by the Gini coefficient– declined from 0.51 in 2001 to 0.38 in 2018.
However, the COVID-19 pandemic will have a significant negative impact, even though El Salvador was the fastest country in Central America to adopt strong containment measures against the outbreak and remains among the least affected in the region.
The Government also took steps to limit the pandemic’s impact on households and businesses. Measures included cash transfers to approximately 60 percent of all households; food distribution for low-income households; payment deferrals for basic utilities, mortgages and personal loans; extensions on income tax payments for individuals and applicable firms; lowering banks’ reserve requirements for newly issued loans, and the temporary relaxation of lending conditions through a grace period for loan repayments, among others. The Government also invested in strengthening the capacity of the public health system, renewed various health care centers and built a new hospital specializing in COVID-19 treatment.
The pandemic will negatively impact poverty reduction and economic growth, as El Salvador’s GDP is expected to contract by 8.7 percent in 2020, due to diminished economic activity, decreased aggregate demand in international markets and a reduction in remittances sent to households mainly from the United States. An economic growth of 4.9 percent is expected in 2021.
Crime and violence also threaten social development and economic growth in El Salvador and are among the main factors driving Salvadorians to migrate. Nevertheless, murder rates have declined dramatically since August 2019, bringing the country’s violence indicators towards the regional average.
El Salvador has also a high exposure to natural hazards, including earthquakes and volcanic eruptions. It is also highly vulnerable to climate change impacts, including more frequent occurrences of floods, droughts, and tropical storms.
Despite these challenges, El Salvador has great potential to bolster its economic growth. The country’s strategic location, with access to many markets, a growing labor force, and a solid industrial base could support the expansion of the trade sector to achieve stronger and more inclusive growth. Development goals could be achieved with a long-term commitment to structural reform, quality job creation and investment in human capital.

Last Updated: Oct 09, 2020
Since COVID-19 struck, the World Bank has been working intensely on fast, broad actions to limit harm and help countries, including El Salvador, prepare for recovery and rebuilding better and stronger than before, by focusing on four priorities:
    i) saving lives threatened by the pandemic;
    ii) protecting the poor and vulnerable;
    iii) securing the foundations of the economy to shorten the time to recovery; and
    iv) strengthening policies and institutions for resilience based on transparent and sustainable debt and investments.
The current World Bank lending portfolio in El Salvador totals US$720 million and includes four investment projects (three pending Legislative approval) to support the response to the COVID-19 pandemic, boost resilient local economic development and support early childhood health and education.
The lending portfolio is complemented by trust-funded operations in the health and environment sectors, as well as advisory services and analytics in areas such as trade facilitation, e-government and disaster risk management, among others.
The World Bank also plans to update its Systematic Country Diagnostic, a comprehensive assessment of El Salvador's growth and poverty reduction challenges for the coming years. This analysis will serve as a reference for adapting the World Bank's work program in El Salvador.

Last Updated: Oct 09, 2020
The Education Quality Improvement Project expanded the adoption of the Inclusive Full Time School (IFTS) Model in 29 municipalities in the country. The project supported the construction of 32 schools with refurbished infrastructure, the renovation of 563 school facilities (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 benefited more than 151,000 students and teachers, including 6,259 students in grades 7 to 9 who received more than 30 hours per week of additional pedagogical activities with the IFTS model, and about 2,500 teachers who got certified in pedagogical skills such as art, physical education, and indigenous cultures, among others.
The Strengthening Public Health Care System Project supported the expansion of the Integrated Health Care Services Model in the 82 poorest municipalities of the country. Project results include the construction of the first national radiology center for cancer treatment, procurement of 44 fully-equipped ambulances, improved management of medical waste in 30 hospitals, the development of the first national strategy for chronic diseases and the creation of the national directorate of chronic diseases within the Ministry of Health. During the implementation of the project, more than 1,300 pregnant women and 14,000 children under age 3 received maternal and childcare services. Also, around 85,000 people benefited from immunization vaccines and close to 8,000 chronic kidney patients received treatment kits. The project also supported the training of over 4,660 health staff.
The Local Government Strengthening Project benefited around 3.4 million people across 262 municipalities through the development of 507 local infrastructure projects, 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, these local infrastructure projects generated around 12,987 temporary jobs.
Through the Income Support and Employability Project, the World Bank financed the government’s Temporary Income Support Program (PATI), which benefitted approximately 41,000 people living in poverty with temporary community jobs and technical training. The program was initially implemented in 25 municipalities and later expanded to eight more in 2015. The project also supported the Ministry of Labor in establishing 49 employment offices to offer job placement services to beneficiaries, along with mobile employment kiosks, employment fairs, and an on-line jobs portal serving around 200,000 persons overall.
The Earthquake Emergency Reconstruction and Health Services Extension Project rehabilitated three hospitals and reconstructed another three, which were either destroyed or damaged during two earthquakes in 2001. The project also conducted preventive maintenance of hospitals and improved hospital services to over 3 million beneficiaries. Through community outreach programs, the project extended health and nutrition services to 1.2 million women, children, and indigenous people in 141 poor municipalities.
The Protected Areas Consolidation and Administration Project updated the National Strategy and Action
Plan for consolidating and managing the Natural Protected Areas System and tested it in two pilot protected areas (Bahia de Jiquilisco and San Diego-Las Barras). The project prevented deforestation and promoted regeneration on over 20,207 hectares. Both protected areas were delineated, and land tenure conflicts were reduced. Training and alternative livelihood investments benefited local solidarity groups and cooperatives and strengthened their support for biodiversity conservation.

Last Updated: Oct 09, 2020