Countries & Regions

Both the Economic Commission for Latin America (CEPAL) and the Executive Secretary of the Central American Monetary Council (SECMCA), indicated in their reports that the decline of the Central American economies had stopped by the end of the first quarter in 2009.  However, in the close of the 2009 year, clear annual indicators were observed that refute this claim in respect to the 2009 financial figures in comparison to the performance of the Central American economies in 2008.

In fact,  El Salvador's real GDP saw a decline of 3.3% throughout 2009 (Table 1), caused by a reduction in domestic and foreign demand.  According to CEPAL in the "Economic Study of Latin America and the Caribbean 2009-2010", total consumption was reduced by 9.9% and the gross capital formation fell by 17.4%.  Additionally, almost all sectors of production experienced a decline; for example, the manufacturing sector (which represents one fifth of the GDP) contracted by 3.4% and the construction sector diminished for the third consecutive year; although it was less pronounced (-0.7%).  SECMCA, in their "Regional Economic Report 2009" indicated a 16.5% reduction in exports from El Salvador, and an 8.5% fall in monetary remissions, considering its important impact on the GDP (17% in 2008 and 16% in 2009).

As to the financial sector, both organizations reported interesting results: i) the use of risk minimization policies by the financial system and preference for titles granted by the public sector; ii) a 4.8% reduction of credit to the private sector, "...situation that, if not corrected, will make a greater economic recovery more difficult..." "...the sectors that were most affected were the construction and housing, private business and loans..." CEPAL; iii) a tendency toward lowering active and passive interest rates; iv) an increase in the proportion of written-off loans, from 2.8% in 2008 to 3.7% in 2009.