El Salvador’s economy will grow by 2.4 in 2023: International Monetary Fund economic outlook

El Salvador has the lowest economic outlook in Central America for 2023

By Karla Ramos  |  Apr 13th, 2023
International Monetary Fund economic outlook
El Salvador’s economy.

After a growth of 2.6 in 2022, the International Monetary Fund predicts that the country’s economy will grow by 2.4 in 2023. The IMF prediction for 2023 is 0.7 higher than the 1.7 forecasted in October 2022.

The projection made by the IMF is similar to that presented by the Central Reserve Bank (BCR), which estimates that the country’s Gross Domestic Product (GDP) will grow this year between 2% and 3%, driven by the positive impact on security.

The projection had already been anticipated after the review of Article IV last February when the IMF pointed out that improved security, along with the income from remittances and tourism, were the main economic engines of 2022.

As long as financial risks and inflation do not become worse and affect global production, El Salvador’s economy could grow more than initially expected in 2023.

However, the International Monetary Fund states that the country will grow less this year, returning to the pre-pandemic economic numbers.

Based on the IMF report, Central America’s growth will be led by Panama, also dollarized like El Salvador, for whom the IMF forecasts a rate of 5.0; Honduras and Guatemala, two substantial trading partners for El Salvador, will grow by 3.7, and by 3.4, respectively.

The International Monetary Fund expects a cumulative economic growth of 3.8% in 2023 for the Central American region.

IMF Economic Outlook
October 2022 Outlook for 2023 April 2023 Outlook for 2023
Panama 4.0 5.0
Honduras 3.5 3.7
Guatemala 3.2 3.4
Nicaragua 3.0 3.0
Costa Rica 2.9 2.7
El Salvador 1.7 2.4

The International Monetary Fund is expecting a “Rocky Recovery.”

The outlook is uncertain again amid financial sector turmoil, high inflation, ongoing effects of Russia’s invasion of Ukraine, and three years of COVID. The baseline forecast is for growth to fall from 3.4 percent in 2022 to 2.8 percent in 2023 before settling at 3.0 percent in 2024. IMF 2023 World Economic Outlook.

The global economy is yet again at a highly uncertain moment, with the cumulative effects of the past three years of adverse shocks—most notably, the COVID-19 pandemic and Russia’s invasion of Ukraine.
2023 IMF World Economic Outlook.