The World Bank In El Salvador

El Salvador is a small, dollarized economy with a population of 6.3 million people closely tied to the U.S. through trade and remittances. Between 2000 and 2023, Gross Domestic Product (GDP) grew at an average annual rate of 2.1 percent. During the same period, official poverty declined by 14 percentage points. Furthermore, with a GINI coefficient of 38.8 in 2022, inequality remained among the lowest in the region.

However, and despite a full recovery from the COVID-19 pandemic, with growth reaching 3.5 percent in 2023, poverty has since increased from 26.8% in 2019 to 30.3% of the population in 2023. Furthermore, around 10 percent of the population is now estimated to be living in extreme poverty compared to just over 5% in 2019.

Recent growth, which is expected to moderate to 2.9 percent in 2024, has been driven primarily by public investment, exports, and private consumption, supported by increased foreign demand, higher remittances, and improved business environment perceptions. Additionally, since 2022, strict security measures have significantly reduced crime and gang violence, which contributed to above-average growth and potentially higher-quality job creation. However, sustaining this momentum is challenged by ongoing structural obstacles, including systemic deficiencies in public service quality, a high debt burden, and increased vulnerability to natural disasters.

These factors depress productivity, hinder human capital development, and limit labor market integration, particularly for women. Despite progress in women’s economic empowerment, significant gaps remain. In 2023, the labor force participation rate among females was 46.1% compared to 76.5% for males. Data from Findex shows that while 36 percent of adults in El Salvador have a bank account, only 29 percent of women have access to one.

While stronger economic activity boosted government revenues by 6.8 percent in 2023, higher government spending (12.3 percent rise) increased the fiscal deficit to 4.7 percent of GDP. Public debt peaked at 84.9 percent of GDP and sovereign spreads remained high, with limited financing options. Since 2021 authorities have been working on successfully negotiating an IMF program to help address these fiscal challenges. At the same time, perceptions around overall governance and quality of institutions have declined since 2016 and remain at levels below the regional average.

To enhance productivity, attract Foreign Direct Investment (FDI), diversify the economy, and further reduce poverty and inequality, comprehensive reforms are needed to address inefficiencies in labor markets, enhance poor skills acquisition, particularly among women and vulnerable groups, and improve infrastructure and resilience to climate change and other potential natural disasters. This will be key to reducing overall risk perceptions about institutional capacity and the economy’s long term growth potential as well as its ability to consolidate gains in terms of reducing poverty and inequality.

Last Updated: Oct 18, 2024

The World Bank's current Country Partnership Framework 2023-27 (CPF) addresses the Government of El Salvador's vision of achieving higher levels of growth, generating more and better jobs, overcoming shortcomings in human capital, and fostering resilience to disasters caused by natural phenomena and climate change. It is based on the systematic country diagnosis - a comprehensive assessment of the challenges faced by El Salvador in terms of growth and poverty reduction.

The CPF has three main objectives aimed at promoting sustainable, equitable and inclusive growth:

• Increased private sector-led job creation, focusing on improving macro-fiscal preconditions and increasing the availability of quality jobs with a special focus on youth and vulnerable population sectors.
• Strengthening human capital throughout the life-cycle, focusing on job supply and El Salvador's most important asset: its people.
• Increasing resilience to disasters and climate change, with special emphasis on reliable access to basic services and a climate-resilient road infrastructure.

The work program in El Salvador comprises two cross-cutting themes: First, promotion of the economic empowerment of women throughout their life cycle, when appropriate, so that they and their families can benefit from better employment opportunities and well-being. Secondly, promote good governance by strengthening institutions and enhancing user participation in key sectors —such as health, water, transportation, education, employment, and local development— aimed at achieving better management outcomes, greater transparency, and improved performance of essential services.

As of October 2024, the World Bank's portfolio in El Salvador includes eight projects totaling USD 1.071 billion. The operations are focused on education and health, with an emphasis on early childhood, as well as on municipal development, transportation infrastructure, water, and improving the employability of young people, especially the most vulnerable segments.

The Growing Up Healthy Together Project (USS 250 million loan) was designed to strengthen health-promoting programs for children aged 0 to 7 years, as well as for mothers before conception and during gestation. The Growing and Learning Together Project (USD 250 million loan and USD 14.25 million in trust fund financing) aims to improve teaching practices in early childhood care and education, and simultaneously renovating pre-selected educational facilities.

Other project being implemented is the Local Economic Resilience Project (USD 150 million loan) to boost local economic development, improve the institutional performance of municipalities, and increase citizen access to services and resilient infrastructure.

The Water Sector Resilience Project in El Salvador (USD 100 million loan) was approved in April 2023. This project aims to improve the quality, reliability, and efficiency of drinking water supply in selected areas of the country, and to provide a rapid and effective response in the event of emergencies caused by natural phenomena.

In October 2023, the Resilient Transportation and Infrastructure Project in El Salvador (USD 150 million loan) was also approved, aimed at enhancing the efficiency of the crucial Apopa logistics hub, which will make domestic travel and development opportunities more accessible to Apopa residents.

The Promoting Job Opportunities and Skills Development Project in El Salvador (USD 150 million loan) was approved in November 2023 to improve access to job opportunities and skills development for youth and adults, focused especially on individuals from vulnerable groups between the ages of 18 and 40.

The loan portfolio is complemented by operations financed by trust funds in the environmental sector, together with advisory and analytical services in the areas of trade facilitation, education, social protection, energy, and disaster risk management, among others.

Last Updated: Oct 18, 2024

The Integrated Landscape Management and Restoration Project is being implemented in the El Imposible Barra de Santiago Conservation Area, which ranges from coastal areas across farmland up to forested heights. It aims at strengthening local environmental governance mechanisms, implement an environmental education plan, improve landscape restoration monitoring, develop ecosystem services compensation mechanisms between communities, improve sustainable landscape management practices over 51,000 ha, restore 1040 ha of degraded land, and generate 444,000 Metric Ton (MT) CO2e of emission reductions.

The Strengthening Public Health Care System Project supported the expansion of the Integrated Health Care Services Model in the 82 poorest municipalities of the country. Project results include the construction of the first national radiology center for cancer treatment, procurement of 44 fully equipped ambulances, improved management of medical waste in 30 hospitals, the development of the first national strategy for chronic diseases and the creation of the national directorate of chronic diseases within the Ministry of Health. During the implementation of the project, more than 1,300 pregnant women and 14,000 children under age 3 received maternal and childcare services. Also, around 85,000 people benefited from immunization vaccines and close to 8,000 chronic kidney patients received treatment kits. The project also supported the training of over 4,660 health staff.  

The Education Quality Improvement Project expanded the adoption of the Inclusive Full Time School (IFTS) Model in 29 municipalities in the country. The project supported the construction of 32 schools with refurbished infrastructure, the renovation of 563 school facilities (classrooms, libraries, study rooms, teacher rooms, and sports and recreation spaces) and the provision of educational material and equipment to 195 schools to adopt the IFTS model. The project benefited more than 151,000 students and teachers, including 6,259 students in grades 7 to 9 who received more than 30 hours per week of additional pedagogical activities with the IFTS model, and about 2,500 teachers who got certified in pedagogical skills such as art, physical education, and indigenous cultures, among others. 

The Addressing Non-Communicable Diseases Project in El Salvador has benefited a total over 80 thousand women between the ages of 30 and 59 with the Human papillomavirus (HPV)  detection test and around 743,683 people with interventions aimed at early detection and timely management of Non Communicable Diseases such as Diabetes Mellitus, Kidney Diseases, among others. It has also promoted the integrative health care model in all municipalities, including institutionalization of the cervical cancer strategy at the national level implying innovative screening tools for accelerated eradication of the disease.

The COVID-19 Emergency Response Project and two additional rounds of financing succeeded in supporting the response to the COVID-19 pandemic, as well as strengthening the national public health preparedness system in El Salvador. The Project contributed to vaccinating approximately 85% of the population defined by El Salvador's national COVID-19 vaccination plan and equipped all ICU beds in the country. Additionally, it enhanced the diagnostic capabilities of 12 hospitals and healthcare personnel: 3,520 health workers were trained as part of the COVID-19 response. The training and communication activities carried out through the project helped increase the resilience of healthcare workers, 82% of whom reported feeling better prepared to manage mental and emotional stress.

Last Updated: Oct 18, 2024