{
  "title": "IMF Executive Board Concludes 2019 Article IV Consultation with El Salvador",
  "publication": "IMF News, May 24, 2019",
  "sourceUrl": "https://www.imf.org/en/news/articles/2019/05/23/pr19181-el-salvador-imf-executive-board-concludes-2019-article-iv-consultation",
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  "summary": "During the past decade El Salvador made considerable strides in social development: poverty, inequality and migration to the U.S declined, especially after 2015, due to sustained social spending and a growing economy.",
  "publishDate": "2019-05-24",
  "sections": [
    {
      "heading": "Background and recent performance",
      "content": "- During the past decade El Salvador made considerable strides in social development: poverty, inequality and migration to the U.S declined, especially after 2015, due to sustained social spending and a growing economy.\n- Real GDP grew by 2½ percent in 2018, fueled by strong domestic consumption and investment.\n- The primary fiscal surplus increased to about 1 percent of GDP in 2018, driven by strong import tax revenues and one-off tax measures; however, the rising interest bill offset the improvement in the primary balance, leading to a slight deterioration of the overall fiscal deficit.\n- Public debt (including pensions) remained at about 70 percent of GDP at end-2018.\n- The banking sector remained solid and used the remittance-fueled increase in deposits to expand credit to the private sector."
    },
    {
      "heading": "Outlook and risks",
      "content": "- Growth projections:\n  - Real GDP is projected to grow at 2½ percent in 2019 and converge to its potential of 2.2 percent over the medium-term.\n- Inflation and remittances:\n  - Inflation is expected to remain anchored at 1 percent.\n  - Remittances growth will decline to its long-term rate.\n- Fiscal trajectory:\n  - Public debt would drift upwards under the baseline as the fiscal balance will deteriorate due the expected loss in temporary revenues and a rising interest bill.\n- Risks:\n  - Downside risks: weaker-than-expected global growth, rising protectionism, and domestic policy slippages, especially if spending measures are adopted without identifying appropriate funding resources.\n  - Upside scenario: global financial conditions may tighten less than expected."
    },
    {
      "heading": "Executive Board assessment and policy recommendations",
      "content": "- Overall assessment:\n  - Directors commended policies that contributed to strong macroeconomic performance and declines in poverty and inequality, but noted risks remain tilted to the downside.\n- Fiscal policy:\n  - Emphasized the need for prompt fiscal adjustment to reduce high public debt.\n  - Called for adoption of frontloaded fiscal measures to put debt on a firmly declining path.\n  - Measures should be calibrated in a growth-friendly way without adversely affecting social outcomes.\n  - Stressed importance of improving revenue collection and tax administration.\n- Growth-enhancing structural reforms:\n  - Recommended measures to combat crime, improve governance, and reduce poverty to raise potential growth.\n  - Suggested increasing investment in public infrastructure, including through public‑private partnerships, improving security, removing barriers to trade and investment, reducing informality, and reducing the gender gap in labor force participation.\n  - Commended improvements to the business environment and competitiveness, including implementation of the El Salvador Seguro plan and regulatory improvements to complete the Northern Triangle customs union.\n- Financial sector and supervision:\n  - Noted banking sector is well capitalized and welcomed progress in risk‑based and cross‑border supervision.\n  - Encouraged approval of the bank resolution law, strengthening the emergency liquidity assistance framework, and ensuring full compliance with the risk‑based supervision framework.\n  - Recommended promoting financial inclusion, including expanding access to fintech services.\n- Governance, anticorruption, and AML/CFT:\n  - Supported recently adopted measures to improve governance, anticorruption and AML/CFT frameworks, while calling for further strengthening.\n  - Recommended enhancing fiscal transparency of the 2020 budget law, improving the audit of fiscal operations, and establishing better spending controls.\n  - Recommended promptly implementing electronic invoicing.\n  - Noted that changes to the anticorruption legal framework should be comprehensive, ensure harmonization of laws and consider the impact on the budget."
    },
    {
      "heading": "Key statistics and selected economic indicators",
      "content": "- Social indicators:\n  - Per capita income (U.S. dollars, 2018): 3,701\n  - Population (million, 2017): 6.4\n  - Percent of pop. below poverty line (2017): 29\n  - Gini index (2017): 38\n- Income and prices (percent):\n  - Real GDP growth (percent): 2015: 2.4; 2016: 2.5; 2017: 2.3; 2018: 2.2; 2019 (Proj.): 2.5; 2020 (Proj.): 1.1? [table shows consumer price inflation separately]\n  - Consumer price inflation (average, percent): 2015: -0.7; 2016: 0.6; 2017: 1.0; 2018: 1.1; 2019 (Proj.): 1.3\n  - Terms of trade, percent change: 2015: 12.4; 2016: -2.9; 2017: -2.1; 2018: -3.9; 2019 (Proj.): -0.9; 2020 (Proj.): 0.9; 2021 (Proj.): 0.1\n  - External sovereign bond spread (basis points): 2015: 497; 2016: 600; 2017: 520; 2018: 424\n- Money and credit:\n  - Credit to the private sector (percent of GDP): 2015: 49.5; 2016: 50.6; 2017: 51.5; 2018: 52.4; 2019 (Proj.): 53.2; 2020 (Proj.): 53.1; 2021 (Proj.): 53.3\n  - Broad money (percent of GDP): 2015: 47.9; 2016: 48.0; 2017: 51.4; 2018: 52.0; 2019 (Proj.): 52.7; 2020 (Proj.): 52.8\n  - Interest rate (time deposits, percent): 2015: 4.2; 2016: 4.4\n- External sector (percent of GDP unless otherwise indicated):\n  - Current account balance: 2015: -3.2; 2016: -2.3; 2017: -1.9; 2018: -4.8; 2019 (Proj.): -4.4; 2020 (Proj.): -4.5\n  - Trade balance: 2015: -21.2; 2016: -19.3; 2017: -19.4; 2018: -22.8; 2019 (Proj.): -23.1; 2020 (Proj.): -22.9\n  - Transfers (net): 2015: 18.6; 2016: 18.8; 2017: 20.2; 2018: 20.6; 2019 (Proj.): 21.2; 2020 (Proj.): 21.1; 2021 (Proj.): 21.0\n  - Foreign direct investment (percent of GDP): 2015: 1.7; 2016: 1.4; 2017: 3.6; 2018: 3.2\n  - Gross international reserves (millions of U.S. dollars): 2015: 2,787; 2016: 3,238; 2017: 3,567; 2018: 3,569; 2019 (Proj.): 3,728; 2020 (Proj.): 3,882; 2021 (Proj.): 4,039\n- Nonfinancial public sector (percent of GDP):\n  - Overall balance: 2015: -3.6; 2016: -3.1; 2017: -2.5; 2018: -2.7; 2019 (Proj.): -3.4; 2020 (Proj.): -3.5\n  - Primary balance 1/: 2015: -0.2; 2016: 0.7; 2017: 0.4; 2018: 1.2\n  - Of which: tax revenue: 2015: 16.7; 2016: 17.2; 2017: 17.7; 2018: 17.9; 2019 (Proj.): 17.6\n  - Public sector debt 2/: 2015: 66.8; 2016: 68.8; 2017: 70.3; 2018: 69.8; 2019 (Proj.): 70.8; 2020 (Proj.): 71.2\n- National savings and investment (percent of GDP):\n  - Gross domestic investment: 2015: 16.0; 2016: 16.6; 2017: 20.4; 2018: 19.0; 2019 (Proj.): 15.5\n  - Private sector 3/: 2015: 13.5; 2016: 14.2; 2017: 18.1; 2018: 16.8\n  - National savings: 2015: 12.8; 2016: 13.7; 2017: 14.8; 2018: 15.7; 2019 (Proj.): 14.5; 2020 (Proj.): 13.2; 2021 (Proj.): 13.1\n  - Private sector: 2015: 13.6; 2016: 15.2; 2017: 14.9; 2018: 12.9\n- Net foreign assets of the financial system (Millions of U.S. dollars): 2015: 1,931; 2016: 2,021; 2017: 2,689; 2018: 2,771; 2019 (Proj.): 2,910; 2020 (Proj.): 3,043; 2021 (Proj.): 3,241\n- Memorandum items:\n  - Nominal GDP (billions of U.S. dollars): 2015: 23.4; 2016: 24.2; 2017: 24.9; 2018: 26.1; 2019 (Proj.): 27.0; 2020 (Proj.): 28.2; 2021 (Proj.): 29.5\n\nIMF Executive Board Concludes 2019 Article IV Consultation with El Salvador, Press Release No. 19/181, May 24, 2019.\n\n---\n\n\n References\n\n- https://www.imf.org/-/media/images/imf/bios/imfboard.jpg\n- The Executive Board\n- El Salvador and the IMF\n- IMF Policy Advice -- A Factsheet\n- Press Releases\n- PRESS CENTER\n- http://www.imf.org/external/np/sec/misc/qualifiers.htm\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2019/05/23/pr19181-el-salvador-imf-executive-board-concludes-2019-article-iv-consultation"
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    "Published: May 24, 2019",
    "During the past decade El Salvador made considerable strides in social development: poverty, inequality and migration to the U.S declined, especially after 2015, due to sustained social spending and a growing economy.",
    "Real GDP grew by 2½ percent in 2018, fueled by strong domestic consumption and investment.",
    "The primary fiscal surplus increased to about 1 percent of GDP in 2018, driven by strong import tax revenues and one-off tax measures; however, the rising interest bill offset the improvement in the primary balance, leading to a slight deterioration of the overall fiscal deficit.",
    "Public debt (including pensions) remained at about 70 percent of GDP at end-2018.",
    "The banking sector remained solid and used the remittance-fueled increase in deposits to expand credit to the private sector.",
    "Growth projections:",
    "Inflation and remittances:",
    "Fiscal trajectory:",
    "Risks:",
    "Overall assessment:",
    "Fiscal policy:",
    "Growth-enhancing structural reforms:",
    "Financial sector and supervision:",
    "Governance, anticorruption, and AML/CFT:",
    "Social indicators:",
    "Income and prices (percent):",
    "Money and credit:",
    "External sector (percent of GDP unless otherwise indicated):",
    "Nonfinancial public sector (percent of GDP):",
    "National savings and investment (percent of GDP):",
    "Net foreign assets of the financial system (Millions of U.S. dollars): 2015: 1,931; 2016: 2,021; 2017: 2,689; 2018: 2,771; 2019 (Proj.): 2,910; 2020 (Proj.): 3,043; 2021 (Proj.): 3,241",
    "Memorandum items:",
    "[https://www.imf.org/-/media/images/imf/bios/imfboard.jpg](https://www.imf.org/-/media/images/imf/bios/imfboard.jpg)",
    "[The Executive Board](https://www.imf.org/external/np/sec/memdir/eds.aspx)",
    "[El Salvador and the IMF](http://www.imf.org/external/country/SLV/index.htm)",
    "[IMF Policy Advice -- A Factsheet](https://www.imf.org/en/about/factsheets/imf-surveillance)",
    "[Press Releases](https://www.imf.org/en/news/searchnews)",
    "[PRESS CENTER](http://presscenter.imf.org/)",
    "[http://www.imf.org/external/np/sec/misc/qualifiers.htm](http://www.imf.org/external/np/sec/misc/qualifiers.htm)",
    "[https://www.imf.org/en/home](https://www.imf.org/en/home)"
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