El Salvador’s economy has experienced sustained growth in recent years. Between 2010 and 2019, the country’s Gross Domestic Product (GDP) has grown at an average rate of 2.4% annually.
This growth has been driven mainly by sectors such as trade, manufacturing, financial services and remittances. The opening of the country to foreign investment has contributed to the development of key sectors, such as maquila and call center services.
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).
SEE ALSO: Essential Guide to Incorporate a Company in El Salvador
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.
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El Salvador economy promises strong growth in uncertain times
The government of El Salvador is implementing several measures to improve the country’s economy. For example, efforts continue to encourage foreign investment. The government is promoting the attraction of foreign investment, offering tax incentives and simplifying procedures to establish and operate businesses in the country. In addition, it is developing trade promotion programs and participating in international fairs to attract investment.
There are also financing and training programs for small and medium-sized enterprises (SMEs) to strengthen their competitiveness and foster their growth. In addition, public-private partnerships are being promoted to foster the development of SMEs.
On the business side, the government is working to improve the business climate in the country by reducing bureaucracy and simplifying the procedures for opening businesses. This includes the implementation of a one-stop shop and the digitalization of administrative processes. And with respect to tourism, measures are being implemented to improve tourism infrastructure, promote the country’s attractions nationally and internationally, and ensure the safety of visitors.
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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