El Salvador has had a great few years economically despite its limited access to international capital markets. Under President Bukele's management, the country has seen unemployment plummet and investment activity increase substantially. Thanks to an announcement from the government outlining reduced public debt through bond buybacks and pension system reform, investors have started to gain more confidence in El Salvador's financial future.
Alongside economic prosperity, El Salvador has unfortunately seen a rise in its current account deficit, which reached 8% of GDP in 2022. Furthermore, domestic debt has grown to 8.75% of GDP and international reserves have fallen to two months of imports. Despite these issues, President Bukele's remarkable success in drastically reducing crime rates has been highly praised but his tactics raise concerns regarding alleged human rights abuses.
With the national election coming up in early 2024, investors are becoming wary of President Bukele's ability to maintain a secure grip on the nation's monetary and fiscal policies. While the administration has been able to hold public expenditure quite low, there is a slight concern over the President's ability to stay steady in the year before the election. One thing is for sure, regardless of El Salvador's standing in the years ahead: President Bukele has put the country back onto the map and has created a stronger foundation for foreign investment.
Mary King
- 2023-04-06
El Salvador’s Economic and Political Risk After President Bukele
Despite President Bukele's remarkable success in drastically reducing crime rates, El Salvador’s current account deficit has grown along with domestic debt and international reserves have declined. With the national election coming up in 2024, investors are becoming wary of the President's ability to maintain a secure grip on the nation’s monetary and fiscal policies.
