El Salvador’s growth projection has jumped 50% since June, with the Salvadoran government now reporting that it expects the economy to grow 9% in 2021. That gives the El Salvador economy one of the strongest growth forecasts in Latin America.
According to Douglas Rodriguez, the president of El Salvador’s central bank, the main drivers of growth include industrial production, investment, household consumption, and exports.
They have contributed to a significant upgrade on predictions for the El Salvador economy, which only two months ago was expected to hit 6% growth in 2021.
The new 9% figure would place El Salvador as the second fastest growing economy in Central America, behind Panama, and the fourth-fastest growing in the entire Latin America region, based on predictions published in July by the UN’s Economic Commission for Latin America and the Caribbean (ECLAC).
According to ECLAC, average growth for the region will hit 5.2% — highlighting the strong showing that the latest prediction represents for the El Salvador economy.
El Salvador economy promising strong growth in uncertain times
The upgraded projection for the El Salvador economy comes as countries throughout the world seek to overcome the turmoil of the ongoing global pandemic.
Notably, the new projection has also come despite the country recently passing a 20% minimum wage hike that will affect an estimated 500,000 workers in this country of less than 7 million people.
It also emerges amid the country pursuing a new law that will make the cryptocurrency Bitcoin legal tender in the country — a move that has been met with mixed reactions and predictions among the international and financial community.
Yet despite all of this uncertainty, mainland Latin America’s smallest country by area has shown strong signs of growth in multiple sectors of its economy.
Growth projection makes country enticing for investors
While the El Salvador economy was already projected to witness growth above the regional average, the new elevated projection will flag the Central American nation as an even more enticing destination for investors.
Although El Salvador is not the best-known investment destination in Latin America, it has demonstrated significant potential since a decade-long civil war in the country came to an end in 1992.
Following the conclusion of peace talks, the El Salvador economy has witnessed considerable and almost unbroken growth in gross domestic product (GDP), which increased nearly five-fold between 1992 and 2019.
That has also seen prosperity rise in the country, with gross national income (GNI) — a key marker of general prosperity — hitting $4,000 per capita in 2019, to place El Salvador as an upper-middle income nation by international standards for the first time (all figures in USD).
The El Salvador economy is diverse, with the services sector contributing approximately 60% of GDP, while industry accounts for 26%. Despite its small size, the country has 17 different free trade zones (FTZs), which offer good incentives to investors and are where much of the industrial base is located.
Notably, the El Salvador economy has continued to grow despite the fact that the country battles well-publicised levels of criminality in the country — suggesting an even brighter economic future as it grows and develops.
Biz Latin Hub can help you doing business in El Salvador
At Biz Latin Hub, we have the expertise and people in place to be able to help you take advantage of the strong opportunities offered by the El Salvador economy. With our comprehensive portfolio of back office solutions, including company formation, accounting, legal, visa processing, and recruitment services, we can be your single point of contact for entering and doing business in El Salvador, or any of the 17 other markets in Latin America and the Caribbean where we have offices.
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