How did El Salvador grow 3.5% last year? It is one of the questions that has been in the economic environment since the Central Reserve Bank (BCR) released on 21 March the official report of how the economy closed in 2023 and how much the sectors grew.
And while for some economists, what had the most impact on that growth rate, much higher than projected, were the adjustments that the RCB itself made to the GDP of previous years (which changed them downwards), the former president of the Central Reserve Bank, Carlos Acevedo, shared with LA PRENSA RANIFIC his analysis of “decomposition of growth” with the new official data released by the BCR.
For Acevedo, one of the essential points of this growth was due to the fall in imports last year. To be able to get the data of how much the economy (i.e. GDP) of a country is the formula is: “GDP” = Consumption – Private investment – Public spending – Exports – Imports.
This is the first year that imports have fallen, although the economy has grown so much, it is usually the other way around. The more we grow people have the more money and the more products. It’s atypical. The other years in which imports have contributed to GDP growth is when the economy was bad, explains the economist.
If imports increase, GDP falls, and vice versa, keeping all other variables constant, he details.
This drop in imports, which according to BCR data was 8.5%, meant that one third of the country’s growth rate (32%) was for that reason.
Hyrically the main growth factor has been consumption, this is the first year in which there is another factor contributing to the increase in GDP that is not consumption, but that fall in imports… is curious, he says.
The fall in imports was the main driver of last year’s growth, it was not the consumption of households that has always been the main engine, it was not exports, it was not public spending, it was not private investment. None of that was, he adds.
For the economist, we will have to wait to see what multilateral agencies say about national accounts.
Other indicators
For the former president of the BCR there is “mixed” data to sustain the highest-than-average growth recorded in recent years.
As is the case of consumption that grew by 2.1%, after growing 5.3% in 2022. The historical average in normal years is 5.4%. Therefore, the data for 2023 is not consistent with higher GDP growth, he explains.
Although others that are consistent with that rate, such as the energy consumption that grew 3.6%, which is above the average growth of 1.6%-2% of normal years. This is consistent with higher GDP growth, he says.
It also highlights that passenger inflows by air grew 37.1%, when the average growth rate between 2011-2019 was 6.8%.
For Acevedo, the evidence is a little mixed, so we will have to continue tuning the analysis.
The fall in imports was the main driver of last year’s growth, it was not the consumption of households that has always been the main engine, it was not exports, it was not public spending, it was not private investment. None of that was.
This article has been translated from the original which first appeared in La Prensa Grafica