Economy, Elections 2009

Impacts of the Global Economic Crisis in El Salvador

Since 1992, the political right has aligned itself with the US and pushed a neo-liberal agenda in El Salvador. This has resulted in free trade agreements, the deregulations of markets, and the privatization of banking, telecommunications, and other important sectors. While Salvadorans with the capital to take advantage of these neoliberal policies have benefited significantly, many have not. Economic stagnation, inequality, and a lack of gainful employment continue to characterize El Salvador’s economy.

Now, in addition to these chronic problems, El Salvador faces the effects of the global financial crisis, which are only just beginning to become apparent.  It’s estimated the 10-12 thousand jobs have been lost in the last 4 months. The predictions for growth in GDP range from the government’s optimistic 3% to JP Morgan’s prediction that GDP will actually fall by 0.5% (See article in El Faro for more info in Spanish)

Economic analysts predict that the worst impacts will be felt in 4 main areas: 1) decline in the value of the dollar, 2) contraction in the credit market, 3) a decline in the demand for Salvadoran exports resulting in unemployment, and 4) a decline in remittances from Salvadorans abroad. Click here for further discussion of these in the full article.