FUNDE Warns About the Slowing Salvadoran Economy, Warns About Falling Purchasing Power

El Salvador, even with an officially dollarized economy, faces a deceleration in its economic apparatus. A report presented by FUNDE

A recent report by FUNDE, a Salvadoran investigative and policy-proposing organization, has highlighted that the country's economy will grow less this year due to a decrease in public investment in infrastructure. The report also noted that the purchasing power of Salvadorans is being affected by rising inflation, which is one of the highest among dollarized economies.

El Salvador's Economy to Grow Less This Year, Warns FUNDE as Purchasing Power Drops

El Salvador, despite having an officially dollarized economy, is facing a deceleration in its economic apparatus. A report presented by FUNDE, a Salvadoran investigative and policy-proposing organization, indicated that the Salvadoran economy will fail to meet the expectations regarding growth proposed by the Reserve Central Bank, El Salvador's central bank.

In its report, the institution claims that the economy will be affected by the fall in the construction sector, which fell almost 17% in April compared to the same month in 2023. This fall might be attributed to the reduction in public investments registered during Q4 2023, according to Otto Rodriguez, coordinator of Macroeconomic Projects at FUNDE.

Roberto Rubio, executive director of FUNDE, stated that the growth projections for the Salvadoran economy must be reduced to adapt to the new circumstances of the country. “The growth projections that have been made to date do not take into account this loss of strength in the economy. They are likely to be revised downwards again,” he stressed.

The institution also highlighted that while the tax income had been higher than in 2023 by almost $500 million, the fiscal deficit reached $56 million due to the high expenditure levels.

Regarding the basic goods basket and microeconomy, an issue affecting President Nayib Bukele's administration, FUNDE registered a worsening in the purchasing power of Salvadorans that has slowed in 2024, but it is still significant. In 2023, a person with minimum wage had to spend 7 of each 10 dollars in food expenses, FUNDE found.

Bukele has taken several measures to control food inflation, including expanding government-sponsored Farmers' Markets and eliminating import duties for food and agricultural products. Still, the Salvadoran economy has the highest inflation among all dollarized economies.

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