El Salvador Economic Performance Assessment - Economic Growth ...

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6 E L S ALVADOR E CONOMIC P ERFORMANCE A SSESSMENTFigure 2-1. Real GDP GrowthGDP growth has been insufficient to raise standards of living.5.04.03.02.01.00.0Time Series2001 2002 2003 2004 2005Year Value2001 1.72002 2.22003 1.82004 1.52005 2.8Summary for 2001- 2005Five year average 2.0Trend growth rate N/ASOURCE: World Economic Outlook 2006.Percent Change765432103.52.8 2.8Expected value and margin of error4.5El Salvador LMI-LAC LMI Costa Rica Chile4.26.1El SalvadorGlobal StandingHighest-five average12.9SLV-1.2Lowest-five averageCAS Code: 11p3Figure 2-2. Share of Gross Fixed Investment in GDPLow investment has been a major reason for weak GDP growth.20.019.018.017.016.015.0Time Series2000 2001 2002 2003 2004Year Value2000 16.92001 16.72002 16.22003 16.62004 15.8Summary for 2000- 2004Five year average 16.4Trend growth rate -1.4Percent30252015105015.624.421.3Expected value and margin of error22.3 21.823.4El Salvador LMI-LAC LMI Costa Rica ChileEl SalvadorGlobal StandingHighest-five average48.6SLV7.7Lowest-five averageSOURCE: IMF Article IV Review, August 2005.CAS Code: 11s3Clearly, a central challenge for the government and donors is to enable higher growth throughmeasures that boost investment and productivity. Meeting this challenge will require moreconcerted efforts to improve the business environment, expand the export base, and increaseinvestments in human capital and infrastructure.
O VERVIEW OF THE E CONOMY 7POVERTY AND INEQUALITYMost of the poverty and inequality indicators for El Salvador date from 2002. They show a highincidence and depth of poverty, and more income inequality than the LMI-LAC average. Anestimated 19 percent of the population struggles to live on less than the international standard forsevere poverty, which is $1 per day in terms of purchasing power parity (PPP). This is a higherrate of severe poverty than the LMI-LAC average of 17 percent, which itself is nearly four timeshigher than the global average of 4.2 percent for lower-middle income countries. Only 2 percentof the population in Costa Rica and Chile lives below $1 PPP per day (Figure 2-3). Likewise, thepoverty gap at $1 PPP per day—a measure of the depth of poverty, relative to the $1 PPP line—was estimated at 9.3 for El Salvador in 2002, a third higher than the LMI-LAC average of 6.9.The UNDP’s Human Poverty Index (HPI) provides an alternative measure of poverty thatincludes deprivation in health and education, as well as income or consumption. 7 In 2003, theHPI score for El Salvador was 15.9. This is an improvement over the HPI score of 17.2 in 2001,but the deprivation rate is well above the average of 11.4 for LMI-LAC.Figure 2-3. Percentage of Population Living on Less Than $1 (PPP) Per DayThe incidence of severe poverty exceeds all of the regional benchmarks.252018.3Expected value and margin of error15Percent10519.017.004.22.0 2.0El Salvador LMI-LAC LMI Costa Rica ChileSOURCE: World Development Indicators 2006.CAS Code: 12p3Along with a high incidence of poverty, the income distribution in El Salvador is also marked bya very high degree of inequality. The share of income accruing to the richest 20 percent of thepopulation in El Salvador is 20.7 times higher than the share accruing to the poorest 20 percent.This is substantially higher than the average for LMI-LAC (17.7)—and this region has the highestinequality in the world. Indeed, the average ratio for all LMI countries is just 8.1. Income7 The HPI ranges from 0 (no deprivation) to 100 (maximum deprivation).
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Page 8 and 9: EL SALVADOR: NOTABLE STRENGTHS AND
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Poverty and InequalityHuman Poverty
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Demography and EnvironmentGenderAdu
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Fiscal and Monetary Policy (cont'd)
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Financial SectorDomestic credit top
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External Sector (cont'd)Structure o
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External Sector (cont'd)CAFTA merch
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Science and TechnologyExpenditure f
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EducationExpenditure perstudent, %
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AgricultureAgriculture valueadded p
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20 T ECHNICAL N OTESfor replacement
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26 T ECHNICAL N OTESCoverage: Data
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30 T ECHNICAL N OTESComposition of
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