El Salvador: Country fact sheet

Content Type
Country Data and Maps
Institution
Economist Intelligence Unit
Abstract
No abstract is available.
Topic
Summary, Economy, Background, Fact sheet
Political Geography
El Salvador

Fact sheet

Annual data 2020a Historical averages (%) 2016-20
Population (m) 6.5 Population growth 0.5
GDP (US$ m; market exchange rate) 24,644.8 Real GDP growth 0.3
GDP (US$ m; purchasing power parity) 54,917 Real domestic demand growth 0.1
GDP per head (US$; market exchange rate) 3,797 Inflation 0.5
GDP per head (US$; purchasing power parity) 8,462 Current-account balance (% of GDP) -1.5
Exchange rate (av) US$:US$ 1.00 FDI inflows (% of GDP) 1.9
a Actual.

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Background: El Salvador was ruled by a succession of military governments between 1930 and 1979. The suppression of political freedoms and the unequal distribution of land and wealth led to growing unrest and the formation of a Marxist guerrilla movement in the late 1970s and a full-scale civil war in 1980. The war ended with a UN-sponsored peace deal in 1992, followed by the first democratic elections two years later. Between 1989 and 2009 the presidency was held by the right-wing Alianza Republicana Nacionalista. A moderate, Mauricio Funes-supported by the Frente Farabundo Martí para la Liberación Nacional (FMLN, a former leftist rebel group)-assumed office in June 2009. The FMLN, led by Salvador Sánchez Cerén, was re-elected in 2014. In 2019 Nayib Bukele of the centre-right Gran Alianza por la Unidad Nacional was elected on an anti-corruption platform, ending bipartisan rule by the traditional parties. In 2020 Mr Bukele founded his own party, Nuevas Ideas, which obtained a two-thirds majority in the February 2021 legislative election.

Political structure: The political system is presidential, with an 84-seat unicameral legislature elected every three years. Presidents are elected for five-year terms, legislators and municipal councils for three-year terms. The Supreme Electoral Court, which oversees all elections, is a pluralistic body with equal representation from the main political parties. There have been proposals to enfranchise the 2.6m Salvadorans living abroad.

Policy issues: Dollarisation, introduced in 2001, holds inflation and interest rates stable, but poses competitiveness risks. Microeconomic and institutional reform will continue to dominate policy to address the deficiencies of the business environment, including costly utilities, low skills levels and lack of affordable financing. In the absence of control over monetary policy, further fiscal reform will become paramount in the wake of an increase in public debt in 2020-21 in order to shore up macroeconomic stability, reduce the public debt burden and improve resilience to exogenous shocks.

Taxation: Tax on corporate income is levied at 30% for earnings above US$150,000, and dividends are taxed at a rate of 5%. All residents are subject to a progressive income tax on a scale of 10-30%. Value-added tax (VAT)-was raised to 13% in 2003. Food products and medicines are exempt from VAT.

Foreign trade: El Salvador is a member of the Dominican Republic-Central America Free-Trade Agreement, a tax-free regime for trade with the US. An EU-Central American Association Agreement was ratified in 2014. In 2018 El Salvador joined an existing customs union between Guatemala and Honduras, its fellow Northern Triangle countries. Imports of goods (f0b) plunged by 10.5% to US$9.4bn in 2020, and goods exports (fob) fell by 12.4% to US$4.2bn.

Major exports 2019 % of total Major imports 2019 % of total
Non-traditional goods 75.3 Intermediate goods 40.0
Maquila 20.4 Consumer goods 39.1
Coffee 2.8 Capital goods 15.5
Sugar 2.2 Maquila 5.4
       
Leading markets 2019 % of total Leading suppliers 2019 % of total
US 42.2 US 31.6
Guatemala 16.0 China 14.9
Honduras 15.9 Guatemala 11.0
Nicaragua 6.7 Mexico 8.2

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