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LatinNews Regional Monitor: Caribbean & Central America - 19 November 2018

In brief: El Salvador

* An International Monetary Fund (IMF) team visited El Salvador from 12-16 November to discuss recent economic developments. According to the IMF statement released following the visit, the team found that the Salvadorean economy is “doing well”; helped by strong domestic demand, it grew by 2.8% in real terms in H12018, almost 0.5 of a percentage point above the country’s estimated potential. While noting that “inflation remained low and the fiscal position was better-than-expected”, the report adds that “in 2019 output growth is expected to plateau, as the global economy starts slowing down”. It goes on to warn that “against a background of further tightening of global financial conditions – rise in interest rates and worsening of borrowing terms – the looming public financing gap of US$1.4bn (more than 5% of GDP) poses downside risks to the overall economic outlook”. To mitigate these risks, and to bolster the economy’s resilience to shocks, continued fiscal discipline and prompt political agreement to secure public financing are paramount. The IMF statement goes onto “encourage the Legislative Assembly to swiftly pass the 2019 budget, the pre-financing strategy for the quinquennium 2019-2024, the revised fiscal responsibility law and the electronic invoicing law”.

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