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Multi-dimensional Review of El Salvador

Strategic Priorities for Robust, Inclusive and Sustainable Development

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El Salvador has made significant development progress in the past 30 years. The end of the civil war in 1992 marked the establishment of a liberal democracy and an open export-led development model, which led to a reduction in poverty and inequality. However, with economic growth averaging a modest 2.4% in the years before the COVID-19 pandemic, and productivity growth of 0.1% over the past decade, the post-war model has not generated the economic momentum or the jobs that the country needs. Decisive action is necessary to kickstart more robust, inclusive and sustainable development. Based on a multi-dimensional analysis of development in El Salvador, this report makes four priority recommendations: 1) build the conditions for a productive transformation and modernisation of the economy; 2) increase the quantity, quality and relevance of education; 3) manage water resources better to deliver water and sanitation for all in a sustainable manner; and 4) modernise the State so it can effectively deliver key public goods, from security to education to health, and successfully steer the next stage in the country’s development.

English Also available in: Spanish

El Salvador needs a productive transformation to overcome its development challenges

To accelerate development, El Salvador needs a productive transformation. This chapter examines productivity growth and the potential of structural transformation to accelerate development in El Salvador. It examines productivity differentials across firms and sectors and analyses key factors that can drive productivity growth at the sector level and at the firm level, including international trade, foreign direct investment, participation in global and regional value chains, and informality. The analysis also identifies opportunities to increase value added in key sectors in the economy. While a number of high value-added sectors are thriving, El Salvador’s exports remain concentrated in goods with moderate levels of economic complexity and of skill and technological intensity, and FDI is not primarily directed to the most innovative technology-intensive sectors, suggesting that there remains unexploited potential to increase productivity growth in the economy.

English Also available in: Spanish

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