Overview
El Salvador Overview: Development news, research, data World Bank Group
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El Salvador’s Economic Growth and Challenges
El Salvador, the smallest country in Central America, has experienced modest economic growth in recent decades, with an annual rate of 2.5 percent between 2013 and 2019. Still, the country managed to significantly reduce poverty and inequality. In 2019, the Gini Index, which ranges from 0 to 1, with 0 representing perfect equality and 1 representing perfect inequality, fell below 0.4, a value considered by the World Bank to be an indicator of high inequality.
Impact of COVID-19 Pandemic
The COVID-19 pandemic had a significant negative impact on people’s lives and families’ incomes. Although El Salvador was quick to adopt strong containment measures against the outbreak and the government rolled out a robust fiscal response to limit the pandemic’s impact on households and businesses, the pandemic dealt a major blow to growth as gross domestic product (GDP) declined by -7.9 percent in 2020.
Economic Outlook
In 2021, El Salvador’s economy grew by 11.2 percent, while growth moderated to 2.6 percent in 2022 and 2.7 percent in 2023, and is expected to hold steady at an average of 2.7 percent in 2024. In the medium term, GDP is forecast to converge to 2.5 percent, above historical averages, on the back of private consumption, public investment, and tourism.
Poverty and Inequality
- Upper-middle-income and lower-middle-income poverty lines, measured at US$6.85 and US$3.65 per person (2017 purchasing power parity – PPP), were 27.5 percent and 8.6 percent in 2022, respectively.
- National poverty rates tell a mixed story. The moderate poverty rate remains relatively stable, slightly below the prepandemic level (despite an increase between 2019 and 2020), while the extreme poverty rate increased in 2022, remaining 4.1 percentage points above the 2019 rate.
Challenges and Sustainable Development Goals
Challenges persist in El Salvador, such as the need to advance reforms for fiscal sustainability. The fiscal response to the COVID-19 crisis helped mitigate its impacts, cost around 16.5 percent of GDP and, together with low revenues and rigid expenditures, pushed public debt to beyond 90 percent of GDP.
Although debt has declined in recent years, it is still above prepandemic levels and the country’s fiscal position remains fragile. The government faces liquidity pressures and has few financing alternatives. A well-defined medium-term fiscal framework could reduce uncertainty and allow the country to regain the ability to issue debt in international markets to foster sustainable growth.
Despite challenges, El Salvador has tremendous potential to drive a dynamic, inclusive, and resilient economic growth. The country can continue to prioritize ramping up investments in human capital to foster accumulation and enhance the effectiveness of the social protection system. It can also boost public and private investment, promote access to high-quality jobs, and foster a more dynamic, competitive, and innovative private sector.
To reduce vulnerabilities, El Salvador can also promote a sustainable and equitable fiscal policy, build resilience to disaster risk and pandemics, and strengthen governance and institutions.
Last Updated: Apr 03, 2024
SDGs, Targets, and Indicators
| SDGs | Targets | Indicators |
|---|---|---|
| SDG 1: No Poverty | Target 1.2: By 2030, reduce at least by half the proportion of men, women, and children of all ages living in poverty in all its dimensions according to national definitions | – Gini Index (indicator of inequality) – Poverty lines (upper-middle-income and lower-middle-income) |
| SDG 8: Decent Work and Economic Growth | Target 8.1: Sustain per capita economic growth in accordance with national circumstances and, in particular, at least 7 percent gross domestic product growth per annum in the least developed countries | – Gross Domestic Product (GDP) growth rate |
| SDG 10: Reduced Inequalities | Target 10.1: By 2030, progressively achieve and sustain income growth of the bottom 40 percent of the population at a rate higher than the national average | – Gini Index (indicator of inequality) |
| SDG 16: Peace, Justice, and Strong Institutions | Target 16.6: Develop effective, accountable, and transparent institutions at all levels | – Fiscal sustainability reforms – Strengthening governance and institutions |
1. Which SDGs are addressed or connected to the issues highlighted in the article?
- SDG 1: No Poverty
- SDG 8: Decent Work and Economic Growth
- SDG 10: Reduced Inequalities
- SDG 16: Peace, Justice, and Strong Institutions
2. What specific targets under those SDGs can be identified based on the article’s content?
- Target 1.2: By 2030, reduce at least by half the proportion of men, women, and children of all ages living in poverty in all its dimensions according to national definitions
- Target 8.1: Sustain per capita economic growth in accordance with national circumstances and, in particular, at least 7 percent gross domestic product growth per annum in the least developed countries
- Target 10.1: By 2030, progressively achieve and sustain income growth of the bottom 40 percent of the population at a rate higher than the national average
- Target 16.6: Develop effective, accountable, and transparent institutions at all levels
3. Are there any indicators mentioned or implied in the article that can be used to measure progress towards the identified targets?
- Gini Index (indicator of inequality)
- Poverty lines (upper-middle-income and lower-middle-income)
- Gross Domestic Product (GDP) growth rate
- Fiscal sustainability reforms
- Strengthening governance and institutions
4. SDGs, Targets, and Indicators
| SDGs | Targets | Indicators |
|---|---|---|
| SDG 1: No Poverty | Target 1.2: By 2030, reduce at least by half the proportion of men, women, and children of all ages living in poverty in all its dimensions according to national definitions | – Gini Index (indicator of inequality) – Poverty lines (upper-middle-income and lower-middle-income) |
| SDG 8: Decent Work and Economic Growth | Target 8.1: Sustain per capita economic growth in accordance with national circumstances and, in particular, at least 7 percent gross domestic product growth per annum in the least developed countries | – Gross Domestic Product (GDP) growth rate |
| SDG 10: Reduced Inequalities | Target 10.1: By 2030, progressively achieve and sustain income growth of the bottom 40 percent of the population at a rate higher than the national average | – Gini Index (indicator of inequality) |
| SDG 16: Peace, Justice, and Strong Institutions | Target 16.6: Develop effective, accountable, and transparent institutions at all levels | – Fiscal sustainability reforms – Strengthening governance and institutions |
Behold! This splendid article springs forth from the wellspring of knowledge, shaped by a wondrous proprietary AI technology that delved into a vast ocean of data, illuminating the path towards the Sustainable Development Goals. Remember that all rights are reserved by SDG Investors LLC, empowering us to champion progress together.
Source: worldbank.org
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