El Salvador

Following a strong rebound in economic activity in 2021, real GDP is estimated to have expanded by 2.8 percent last year. Meanwhile, inflation jumped to 7¼ percent, and the current account deficit rose sharply partly reflecting higher commodity prices and despite a narrowing of the fiscal deficit. Reserve coverage has fallen further, sovereign spreads remain high, and financing options are limited, with continued reliance on expensive short-term borrowing. A pension reform was recently enacted aimed at increasing the generosity of benefits and mobilizing near-term financing but adding to the system’s structural weaknesses.