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The projections made for Salvadoran economic growth in 2021 by both the International Monetary Fund and the World Bank are greater than the official forecast made by the nation’s government but less than what was initially predicted.
Following the severe blow suffered by the Salvadoran economy in 2020 as a result of the COVID-19 pandemic multilateral international agencies expect a recovery of Salvadoran economic growth in 2021.
El Salvador entered into a generalized mandatory home quarantine, as did the other American and European economies, in mid-March of last year after the first occurrences of the COVID -19 contagion was identified. These confinement measures were extended until the end of the month of August.
During this five-month period, establishments that had been designated as being essential such as supermarkets and pharmacies were allowed to continue to operate, while the rest of the country’s economic activity was put on hold. This included collective public passenger transport services. At that time, the Ministry of Finance of El Salvador estimated that only 20% of the country’s productive sector remained active.
Against this backdrop, the International Monetary Fund (IMF) estimated that the nation’s Gross Domestic Product or GDP (the measure of the flow of goods and services produced by a country’s economy) fell by 9% in 2020. In spite of this, the IMF remains enthusiastic that in 2021 the world and Salvadoran economies will recover to experience a significantly positive “bounce.”
After learning of the International Monetary Fund’s projection, President Nayib Bukele reacted to criticism from several members of the Salvadoran Parliament warning that the Executive had raised the projection figures of economic growth to influence the development of the preliminary draft of El Salvador’s 2021 General Budget.
Last September the Executive Branch of the Salvadoran Government presented its preliminary draft of the 2021 budget. However, concerns were raised at that time by both economists and MPs due to the economic uncertainty that continued to be caused by the COVID pandemic. According to IMF economists, however, current conditions appear to favor economic recovery due to expected growth of income from family remittances and the resumption of economic activity.
The World Bank Predicts Salvadoran Economic Growth in 2021
In addition to the International Monetary Fund, the World Bank (WB) recently published its 2021 economic outlook report for Latin American countries. In its projections for El Salvador, the organization forecasts that the country’s Gross Domestic Product (GDP) will increase by approximately 5%.
According to the document “despite the challenges that it faces, El Salvador has great potential to boost its economic growth in the coming months. The country’s strategic location with access to many markets, its growing workforce, and a strong industrial base can support the expansion of the commercial sector to achieve stronger and more inclusive growth.”
A recently published press release by the Government of El Salvador asserts that the World Bank’s projections of Salvadoran economic growth in 2021 are consistent with those provided by the International Monetary Fund that “forecasts that the Central American country’s GDP growth above 4.0% by 2021”, as well as those revealed by Fitch Ratings that “forecasts economic growth of 5.0% ” for the nation.
The World Bank also noted in its report that it expects El Salvador to be one of the fastest-growing Central American countries in the face of the COVID-19 pandemic.
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