Latin American Economic Outlook 2022

El Salvador

1. Recent trends

Poverty in El Salvador has decreased from 40.4% in 2016 to 30.7% in 2020, although it remained above the Latin America and the Caribbean (LAC) average of 26.3%. Extreme poverty also decreased in that period from 10.7% to 8.3%, below the LAC average (8.7%). The population living in completely informal households was 54.4% in 2018, above the LAC average (36.3%). Regarding environmental indicators, in 2019, greenhouse gas (GHG) emissions per capita were 2.0 tonnes of carbon dioxide equivalent (t CO₂e), lower than the averages for LAC (6.3) and countries belonging to the Organisation for Economic Co-operation and Development (OECD) (9.1). That year, the share of the population exposed to air pollution levels that pose risks to human health (PM2.5 at more than 10 µg/m³) was 99.9%, higher than 95.4% for LAC and 61.0% for the OECD. The marine protected area of El Salvador accounted for just 0.7% of its territorial waters in 2021, compared to 7.3% for LAC and 18.6% for the OECD. On the fiscal side, environmentally related tax revenue was 0.5% of GDP in 2020, below LAC (1.0%) and the OECD (2.1%). Total tax revenue as a percentage of GDP in 2020 was 21.9%, on par with the LAC average (21.9%), but below the OECD average (33.5%).

2. Long-term development policies for a green transition

The impacts of climate change are already severely affecting El Salvador’s livelihoods and economy. As a policy response, the National Climate Change Plan (2022-26) went through public consultation in 2022 and will serve as a strategic reference tool for public administration measures. In addition, the National Energy Policy 2020-2050 defines long-term strategic objectives for El Salvador’s energy system, including the development of renewable energy sources to reduce dependence on imported fossil fuels.

Regarding mitigation, El Salvador is developing a Long-Term Climate Strategy (ED 2050), with support from EUROCLIMA+ and the International and Ibero-American Foundation for Administration and Public Policy of Spain. El Salvador participates in the Advancing a Regional Approach to e-mobility in Latin America initiative of the United Nations Environment Programme (UNEP) and the Green Climate Fund (GCF). Adaptation plays a crucial role in El Salvador. A project to elaborate a National Adaptation Plan, with support from the UNEP and the GCF, is expected to be launched before the end of 2022. Two large regional adaptation projects are currently underway. Project RECLIMA applies an integrated landscape approach in the country’s dry corridor area, with support from the GCF and the Food and Agriculture Organization (FAO). To enhance the climate resilience of rural communities and ecosystems in the Ahuachapán-Sur region, El Salvador promotes forest landscape restoration, productive alternatives and the production of climate and hydrological information, with support from the United Nations Adaptation Fund and the United Nations Development Programme (UNDP).

El Salvador’s international partnerships largely focus on environmental conservation and restoration. Within LAC, El Salvador co-operates with Costa Rica, Guatemala, Honduras, Nicaragua and Panama to promote ecosystem-based adaptation technologies in the Central American Dry Corridor, supported by the Central American Commission for Environment and Development, UNEP and the FAO. Beyond LAC, El Salvador is currently working with the Global Environment Facility (GEF) on the sustainable urban development of the San Salvador metropolitan area, supported by the UNDP (2019), and on integrated landscape management and restoration of land in the El Imposible-Barra de Santiago conservation area, supported by the World Bank (2021). Ecosystems in degraded areas of the Complejo Jaltepeque are restored, with financial support from the European Union and Germany (2021).

Regarding green finance, El Salvador established the Mesa de Financiamiento Climático for the implementation of a financial strategy to mobilise and track public and private funding for sectoral implementation plans to achieve its nationally determined contributions (NDCs). To reverse its high degree of environmental degradation, mainly due to agricultural activities and fires, El Salvador established a National REDD+ (Reducing Emissions from Deforestation and Forest Degradation) Strategy to access funding for the restoration of ecosystems and landscapes.

Key indicators – El Salvador

	El Salvador		LAC		OECD
Social
	2016	2020	2016	2020	2016	2020
Extreme poverty	10.7	8.3	8.1	8.7	N/A	N/A
Poverty	40.4	30.7	25.9	26.3	N/A	N/A
Share of Internet users (% of population)	29.0	54.6	53.7	68.1	81.8	88.0
	2016	2019	2016	2020	2016	2019
Gini index	40.0	38.8	46.3	45.3	34.9	34.2
	2010	2018	2009	2018	2009	2018
Share of total population in informal households (%)	N/A	54.4	43.4	36.3	N/A	N/A
Share of total population in informal households, upper-income quintile (%)	N/A	24.4	24.5	13.6	N/A	N/A
Share of total population in informal households, lower-income quintile (%)	N/A	90.8	70.4	72.0	N/A	N/A
	2016	2019	2016	2019	2016	2019
Health expenditure (% of GDP)	7.7	7.2	6.5	6.8	8.7	8.8
SIGI index	N/A	22.9	N/A	25.4	N/A	17.5
	2015	2018	2015	2018	2015	2018
PISA score in science	N/A	N/A	411	407	489	487
Productivity and innovation
	2016	2021	2016	2021	2016	2021
Labour productivity (% of the United States)	N/A	N/A	29.0	26.6	69.9	67.2
	2016	2020	2016	2020	2016	2020
High-tech exports (% of manufactured exports)	5.4	6.4	8.4	7.2	16.5	16.2
	2016	2019	2016	2019	2016	2019
R&D expenditures (% of GDP)	0.1	0.2	0.3	0.4	1.8	2.0
Citizens’ perceptions and institutions
	2016	2020	2016	2021	2016	2021
Share of population satisfied with efforts to preserve the environment (%)	44.8	58.1	46.2	42.0	55.3	51.2
Share of population with confidence in national government (%)	25.2	80.4	34.2	39.4	40.3	46.3
Share of population that thinks corruption is widespread throughout government (%)	70.0	39.4	74.5	70.0	59.0	54.9
Share of population satisfied with the education system (%)	62.3	69.9	64.9	54.3	67.0	66.8
Share of urban population satisfied with the availability of quality health care (%)	58.7	54.0	49.2	48.9	68.2	69.5
Environment and the green transition
	2004-19		2004-19		2004-19
Loss of natural and semi-natural vegetated land (%)	0.6		1.5		1.3
	2016	2019	2016	2019	2016	2019
GHG emissions per capita excluding LUCF (t CO2e)	1.9	2.0	6.3	6.3	9.6	9.1
Air pollution – exposure to PM2.5 (annual average exposure to more than 10 µg/m3, % of population)	99.9	99.9	95.5	95.4	61.3	61.0
	2016	2019	2016	2019	2016	2020
Contribution of renewables to total primary energy supply (%)	45.8	42.9	34.2	33.4	19.7	22.9
	2016	2021	2016	2021	2016	2021
Marine protected areas (% of territorial waters)	0.7	0.7	2.5	7.3	16.5	18.6
Fiscal position
	2016	2020	2016	2020	2016	2020
Environmentally related tax revenue (% of GDP)	0.6	0.5	1.1	1.0	2.4	2.1
	2016	2020	2016	2020	2016	2020
Total tax revenues (% of GDP)	20.5	21.9	22.2	21.9	33.6	33.5
Share of VAT (% GDP)	7.5	8.3	5.8	5.6	6.6	6.7
Share of PIT (% GDP)	3.0	3.3	2.1	2.2	7.8	8.3
Share of CIT (% of GDP)	3.2	3.8	3.3	3.4	2.9	2.7
Perception of tax evasion (%)	N/A	27.0	N/A	27.3	N/A	N/A
Debt service (% of total tax revenue)	14.2	20.1	11.3	13.0	5.6	5.2
	2016	2020	2016	2020	2016	2019
Social expenditure (% of GDP)	7.8	13.8	11.5	13.6	20.0	19.9

Note: See the Reader’s Guide for definitions and sources.

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