2016年-IMF国际货币组织全球_El_Salvador_Selected_Issues_84页_1mb

El Salvador: Summary of Selected Issues

Core Content

This document provides an in-depth analysis of El Salvador's economic challenges, focusing on growth, migration, and remittances. It also examines the fiscal responsibility law and the pension system, highlighting key policy issues and potential reforms. The analysis is based on data and studies up to June 1, 2016, and includes cross-country comparisons to better understand El Salvador's economic position.

Main Points

1. Growth Performance and Challenges

• El Salvador's long-term growth has been disappointing, with potential growth now estimated at around 2%, which is half the rate of other Central American countries.
• The country has been a major outlier in terms of low investment and entrepreneurship, and a low rate of consumption growth.
• The 2009 financial crisis led to a sharp decline in consumption (about 10% of GDP), indicating a pre-crisis unsustainable consumption boom.
• Investment and tradables productivity have been key growth bottlenecks, with low savings rates and poor business environment also contributing to the problem.
• The real exchange rate is assessed as overvalued by about 10% in 2016.

2. Growth Diagnostics and Analysis

• The Hausmann growth diagnostics approach was used to identify growth constraints, but it does not fully explain El Salvador's growth gap compared to regional peers.
• Key constraints identified include:
  • Low tradables productivity
  • High crime rates
  • Low savings rates (recently identified as a serious constraint)
  • Inefficient tax policies (tax rates have increased relative to the region)
  • Weak labor market regulation and low competitiveness
• Fiscal deficits and public debt (around 60% of GDP) are relatively high and on an upward trend.
• Monetary policy is not present, but inflation has remained low.
• Financial soundness indicators show high capital buffers but low systemic liquidity.

3. Migration and Remittances

• Outward migration to the US has been a defining feature of El Salvador, with high net migration outflows compared to other Central American countries.
• The emigration rate started early due to the civil war and humanitarian response from the US.
• Migration has contributed to lower population and labor growth, with the young population being the most affected.
• Remittances are a major source of income, accounting for 10-20% of GDP in Central America.
• Remittances are largely comparable to trade and capital flows, often outweighing FDI.
• Remittances are sent mainly by middle-aged migrants, many of whom are illegal and work in low-level service jobs.
• The propensity to send remittances tends to decline over time, with about 70% of senders having migrated within 15 years.
• Family unification and loss of ties with the homeland are major reasons for reduced remittances.

4. Policy Implications

• The Salvadoran government has emphasized raising potential growth to 3% through a five-year plan.
• There is no clear consensus on whether the growth problem stems from demand-side or supply-side issues.
• Fiscal responsibility law and fiscal rules are proposed to improve fiscal sustainability and public debt management.
• Pension reform is suggested to reduce unfunded liabilities, though it may not improve long-term fiscal sustainability.
• Financial inclusion and deepening have been progressing, but crowding out of private sector credit remains a challenge.
• Business environment and investment climate are important factors that need improvement for sustainable growth.

Key Information

• Outward migration has been a key factor in low growth and moderate remittance growth.
• Dollarization has not been conclusively shown to be a major driver of growth or a constraint, but it has raised the bar for economic policy quality.
• Data limitations hinder accurate growth diagnostics, particularly in measuring productivity, employment, and investment returns.
• Employment data is highly uncertain due to the large informal economy and outward migration.
• Cross-country comparisons show that El Salvador is an outlier in migration, remittances, and growth performance.

Conclusion

• El Salvador's growth puzzle is multifaceted, involving low investment, high crime, poor business environment, and outward migration.
• A holistic approach is needed to address these issues, combining fiscal reforms, structural improvements, and enhanced financial inclusion.
• Fiscal responsibility and pension reform are critical for long-term sustainability.
• The role of remittances and migration in shaping the economy remains complex and context-dependent.