With a per capita GDP of $4,131, El Salvador is the fifth poorest country in North America. El Salvador features a small elite that has become affluent as a result of the country’s coffee and sugar exports. On the other side, approximately 40% of the population lives in poverty. Over half of El Salvador’s population subsists on less than $2 per day. Gangs and violence, as well as a poor educational system, all contribute to the country’s poverty.
What is the foundation of El Salvador’s economy?
El Salvador’s economy has traditionally been based on agriculture, although services and industry increasingly employ a larger percentage of the workforce and account for a larger share of the country’s GDP. El Salvador’s economy has suffered as a result of the country’s 12-year civil war. Attempts to resuscitate the country’s economic life began in the early 1990s, and the economy had recovered by the beginning of 2001, when El Salvador adopted the US dollar as its official currency.
Crops and pasturage account for around half of the land. Rice, beans, oilseeds, and sorghum are also farmed as subsistence crops, while coffee and sugar are the main cash crops. Food and beverage processing is vital, and El Salvador’s top manufacturers include petroleum, chemicals, fertilizer, textiles, furniture, and light metals. The Inter-American Highway runs through El Salvador, connecting San Salvador to the ports of La Unin, Acajutla, and La Libertad, as well as the inland communities of San Miguel and Santa Ana.
El Salvador’s principal exports are offshore assembly products, coffee, sugar, shrimp, textiles, and chemicals. Raw materials, consumer and capital products, gasoline, food, petroleum, and electricity are the most common imports. By far the most important trading partner is the United States.
What is El Salvador’s most valuable export?
Textiles, chemicals, rubber and plastics, and metallic products account for the majority of El Salvador’s exports (97 percent of total sales). Sugar and coffee are two of the country’s traditional exports. With 45 percent of overall sales, the United States is the most important export partner.
Is it legal to use Bitcoin in El Salvador?
El Salvador became the first country to allow consumers to use cryptocurrency alongside the US dollar in all purchases in September.
Is El Salvador getting wealthier?
El Salvador, Central America’s smallest country, with the third-largest population (6.5 million) of the six Central American countries. It is Central America’s most densely populated country, ranking in the 83rd percentile globally in terms of population density.
El Salvador’s economy has grown slowly in recent decades, with annual GDP growth topping 3% only twice between 2000 and 2020, yet poverty and inequality have decreased significantly.
The poverty rate fell from 39 percent in 2007 to 22.3 percent in 2019 (based on a US$5.5 per person per day poverty line). Extreme poverty, defined as a daily income of less than US$1.9, has decreased from 13% in 1995 to 1.5 percent in 2019. Labor income and employees transferring from low-paying agricultural jobs to higher-paying jobs have been the main drivers of poverty reduction. Remittances have also had a good influence in rural areas, however it is smaller when compared to labor income.
El Salvador became the most equitable country in Latin America and the Caribbean as a result of pro-poor growth and increased shared wealth (LAC). The Gini coefficient dropped from 0.54 in 1998 to 0.38 in 2019, making it the lowest in the region. Labor income drove the reduction in inequality in cities, whereas income from pensions and remittances drove the fall in inequality in rural areas.
The COVID-19 pandemic, on the other hand, has had a considerable detrimental influence on people’s lives and finances. Despite the fact that El Salvador was the first Central American country to implement strong containment measures against the outbreak, and the government launched a robust fiscal response to limit the pandemic’s impact on households and businesses, the pandemic has the potential to push poverty levels back to levels not seen since 2016, reversing years of progress.
The poverty rate is predicted to rise by up to 5.9% as a result of the epidemic. El Salvador has one of the highest percentages of vulnerable persons in the region (48%) and a further drop in economic activity could result in a far bigger number of people at danger of falling into poverty. The crisis also had an influence on growth in 2020, with GDP declining by 7.9%.
Growth is expected to pick up in 2021, boosted by remittance-fueled spending and exports. El Salvador’s GDP is predicted to increase at an annual rate of 8% in 2021 and 4% in 2022. COVID-19 vaccine has been a success, with a vaccination rate of about 60% by late September 2021, one of the highest in the region.
Challenges remain, such as the need to advance fiscal sustainability reforms. The budget deficit was 9.2% of GDP in 2020, while the debt was 91.8 percent of GDP. Higher revenues from the economy’s recovery and the phase-out of extraordinary spending will help keep the deficit at 4% of GDP and the debt at 86.1 percent of GDP until 2022, but debt management will remain a struggle after that.
El Salvador’s social development and economic growth have also been threatened by crime and violence, which is one of the factors prompting Salvadorans to migrate. Nonetheless, since August 2019, murder rates have dropped considerably, bringing the country’s violent metrics closer to the regional norm.
El Salvador is especially subject to natural hazards such as earthquakes and volcanic eruptions, as well as climate change-related effects such as more frequent floods, droughts, and tropical storms, all of which disproportionately affect the poor and vulnerable.
Despite these obstacles, El Salvador has a lot of room to improve economically. The country’s favorable location, with access to a wide range of markets, a growing labor force, and a strong industrial foundation, might aid in trade expansion, resulting in greater and more inclusive growth. With a long-term commitment to structural reform, quality job creation, and human capital investment, development goals could be met.
Which South American country is the poorest?
South America’s Poorest Countries
- $3,374 Venezuelan pesos With a per capita GDP of $3,374, Venezuela is the poorest country in South America.
- Bolivia is worth $3,683. In terms of GDP per capita, Bolivia is the second poorest country in South America.
Is the economy of El Salvador improving?
We estimate the economy to rise by roughly 10% of GDP in 2021, and 3.2 percent in 2022, following a steep decrease in 2020. This is due to an increase in external demand as well as El Salvador’s response to the pandemic.
Is El Salvador’s economy doing well?
El Salvador’s economy is ranked 90th in the 2022 Index for economic freedom, with a score of 59.6. El Salvador is placed 18th out of 32 countries in the Americas, with a score that is higher than the regional average but lower than the global average.
El Salvador owes how much money?
El Salvador’s fiscal deficit is expected to reduce slightly to 5.5 percent of GDP in 2022, down from 5.7 percent in 2021, according to Fitch. Short-term debt has increased dramatically over the last two years, with Cetes and Letes short-term debt rising to USD2. 6 billion in January 2022 from USD896 million in YE 2019, adding to the company’s 2022 funding requirements.