Caribbean & Central America - May 2007 (ISSN 1741-4458)

EL SALVADOR: ECONOMIC OVERVIEW

Central America 16 May 2007 Modified: 16 May 2007 147 views

Local economists are fretting about the prospects for hitting the government's growth target for 2007. The government is aiming for a rate of between 4.5% and 5.5%. Growth in 2006 was a whisker over 4%, the best performance for 10 years.

Government officials are concerned about what might happen politically and socially if the growth rate wanes. They concede that the decent performance in 2006 blunted the edge of some of the criticism of successive centre-right governments who had imposed orthodox neo-liberal policies on the economy. They admit that even maintaining growth at its current rate will require heroic efforts.

The apparent slowdown in the US economy in the first part of this year will hurt the Salvadorean economy. So will the pick up in the international oil price. On the other hand, the pick-up in tourism should benefit the economy. Whether tourism can withstand the increasing signs of social unrest and the upswing in crime is far from clear.

Inflation : Inflation in April was 0.07% which brings the rate for the first four months to 1.6%. The economy ministry claimed that the rate was the lowest for this period for four years.