El Salvador

El Salvador is a small, dollarized economy with a population of approximately 6 million, closely linked to the United States through trade and remittances. Since 2022, strengthened security measures have drastically reduced crime, boosting market confidence and removing a key barrier to economic activity and sustained economic growth. However, challenges persist, including low productivity, limited human capital, poor job quality, large fiscal deficit, and restricted access to external financing.

The government has recently taken steps to address these issues by approving austere budgets for 2025 and 2026, clearing domestic arrears, and reducing short-term financing pressures through three debt buybacks between 2022 and 2024. At the same time, major transformative programs have been launched to modernize education and healthcare by integrating AI, complementing efforts that are supporting transformations in early childhood education and health services.

In February 2025, the IMF Executive Board approved a US$$1.4 billion Extended Fund Facility (EFF) program to support fiscal consolidation, strengthen financial stability, and improve governance and transparency. The program, with its first three revisions successfully completed, has paved the way for increased support from multilateral banks, including the World Bank, to back reforms aimed at ensuring the sustainability of public finances, strengthening resilience to disasters, and promoting growth.

To boost productivity, attract foreign direct investment, diversify the economy, create quality jobs, and reduce poverty, El Salvador will need to undertake further comprehensive structural reforms, as well as work to facilitate improvements in labor markets, infrastructure, and climate resilience.

In the short term, labor intermediation actions are needed to connect workers with available job opportunities, strengthen the financing ecosystem for MSMEs, and promote investment in strategic sectors such as tourism. In the medium term, it will be necessary to address skill gaps, especially among women and other vulnerable groups, to ensure growth is widespread and sustainable.

Last Updated: October 6, 2026

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Between 2000 and 2024, El Salvador’s economic growth averaged 2.1 percent annually, historically limited by high crime rates and other structural constraints. Economic activity has largely depended on consumption financed by remittances, while investment, exports, and productivity have lagged. Poverty at the upper-middle income line of US$8.30 per person per day (2021 PPP) more than halved during this period but remained high in rural areas. These challenges, together with insufficient human capital and low job quality, have constrained growth and limited further poverty progress.

Since 2022, the sharp decline in crime, together with the government’s commitment to reducing macro-fiscal imbalances, has strengthened market and investor confidence. Combined with record remittance inflows, these developments helped accelerate economic growth from 2.6 percent in 2024 to 3.9 percent in 2025, driven by strong private investment and consumption, as well as robust activity in construction and tourism. Growth is expected to strengthen further to 4.5 percent in 2026, led by continued expansion in consumption and investment, particularly in construction. Inflation, meanwhile, is expected to reach 2.3 percent in 2026, primarily reflecting higher fuel costs.

Poverty is estimated to have declined from 28.7 percent in 2024 to 24 percent in 2025, although it continues to disproportionately affect children and women in productive age. It is expected to decline steadily through 2028, reflecting labor income gains from job creation in dynamic sectors like construction and tourism, despite slower growth in remittances.

Following the approval of the second and third reviews under the International Monetary Fund’s Extended Fund Facility in October 2026, fiscal consolidation is expected to continue, supported by stronger revenues and expenditure restraint. The government has committed to advancing civil service, pension, and public financial management reforms, with the primary surplus projected to reach 3.6 percent by 2028.

Last Updated: October 6, 2026

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The World Bank Group (WBG) supports El Salvador in reducing poverty through loans, grants, technical assistance, advisory services, and knowledge sharing. Working with the public sector, the World Bank’s portfolio in El Salvador amounts to US$2.4 billion and includes nine investment operations, one development policy loan, one program-for-results (PforR) loan, and several trust funds. These operations focus on boosting economic growth and job creation through investments in education and skills development, health, transport, water, energy, access to finance, and local economic development.

Key initiatives aimed at enhancing employability include the Enhanced Financial Intermediation for Jobs Project, which expands access to credit for MSMEs, and a PforR designed to accelerate learning through digital innovation and AI. These efforts are complemented by a project to promote skills development, as well as the Grow and Learn Together Project, which seeks to improve teaching practices and upgrade early childhood facilities.

The Development Policy Loan for Fiscal Sustainability and Resilience supports efforts to bolster fiscal sustainability and climate resilience. In health, the healthcare project reinforces primary care and complements the Growing Up Healthy Together Project, which promotes early childhood development. The resilient transport and infrastructure project improves connectivity in Apopa, while the economic resilience project strengthens municipal services. Additional support focuses on improving potable water services and expanding renewable energy. The World Bank also supports sustainable land use, project preparation, and advisory services in education, social protection, energy, and disaster risk management.

Supporting the private sector, the International Finance Corporation (IFC) has a US$578 million portfolio, including mobilization, focused primarily on financial markets, health, energy, and trade finance.

In 2026, the WBG established a Joint Representation in El Salvador, bringing together the World Bank, IFC, and the Multilateral Investment Guarantee Agency (MIGA) to strengthen public-private collaboration, mobilize investment, support reforms, and create jobs.

Last Updated: October 6, 2026

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The World Bank’s current Country Partnership Framework 2023–2027 (CPF) addresses the Government of El Salvador’s vision of achieving higher levels of growth, generating more and better jobs, overcoming shortcomings in human capital, and fostering resilience to natural disasters and climate change. It is based on the 2022 Systematic Country Diagnostic, a comprehensive assessment of the challenges faced by El Salvador in terms of growth and poverty reduction.

The CPF has three main objectives aimed at promoting sustainable, equitable, and inclusive growth:

• Increased private sector-led job creation, focusing on improving macro-fiscal and contextual conditions to promote access to quality jobs.
• Strengthening human capital throughout the life cycle, by investing in El Salvador’s most important resource: its people. Goals start with strengthening services for early childhood years (preschool, maternal and child health) and aim to connect youth (especially the most vulnerable) to employment and/or entrepreneurship opportunities.
• Increasing resilience to disasters and climate change, with special emphasis on reliable access to basic services, especially water and climate-resilient road infrastructure.

Under the CPF, the country’s work program has been bolstered by two cross-cutting themes. First, promote the economic empowerment of women throughout their life cycle, so that they and their families can benefit from better employment opportunities. Second, promote good governance standards by strengthening institutions and enhancing citizen participation in key sectors where the WBG is engaged with, such as health, water, transportation, education, employment, and local development, aimed at promoting transparency and quality public services.

You can download the CPF here

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