El Salvador Growth Falls Behind Rest of Central America: CMCA

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By LatAm Reports Editor

In August, El Salvador had an annual increase of 1.6 percent. Growth projections for 2024 are not favorable.

With an annual growth of 1.6%, El Salvador ranked as the country with the lowest economic growth in August, compared to the rest of the nations of Central America and the Dominican Republic (CARD), points out the Executive Secretariat of the Central American Monetary Council in its latest report of the regional situation.

In August, the year-on-year growth of the region, including the Dominican Republic, stood at 3.6%; Costa Rica stood out as the country with the highest rate of GDP growth, with an increase of 7.0%, followed by Nicaragua with 6.1% and Honduras with 5.5% and Guatemala 3.0%.

Lourdes Molina, economist for El Salvador at the Central American Institute for Fiscal Studies (ICEFI), says that the economic growth projections for this 2023 are closer to 2%, returning to the normal trend that the country has had in the last two decades.

Growth is going to be even slower in 2024 and that’s going to result in a slowdown in job generation.
Lourdes Molina, country coordinator for El Salvador of the ICEFI.

On the down

The document highlights the construction sector, which in August positioned itself as the fastest growing activity with 8.2% year-on-year rise. But the situation has been changing over the months.

According to the Economic Activity Volume Index (VAT), the sector has plummeted from year-on-year growth of 34.7 % it presented in June to 6.7 % in September.

Molina points out that growth is going to be even slower in 2024 and that will result in a slowdown in job generation. “If there is no response from public policies, what we are going to observe is that the slowdown is going to deepen and there may be a fall in growth rates,” he says.

“We hope that economic growth for this year will be 2.6 percent (…) we know that El Salvador is a country that depends on what happens around the world and in that sense we are committed to doing everything in our power to mitigate any negative impact,” said Minister of Economy María Luisa Hayem recently in a television interview.

When consulted on the subject, the former president of the Central Reserve Bank (BCR), Carlos Acevedo, merely said that “that has been the reality of the country in the last quarter of a century and that will again be the reality next year.”

In August, the year-on-year growth of the region, including the Dominican Republic, stood at 3.6%; Costa Rica stood out as the country with the highest growth rate of GDP, with an increase of 7.0%.

This article has been translated from the original which first appeared in La Prensa Grafica