El Salvador Growth Forecast of 4.5 Percent Tops Official Estimates
EL SALVADOR · ECONOMY
Key Facts
- —What happened: The Salvadoran industrialists’ association, the ASI, forecast 4.5 percent economic growth for 2026 this week.
- —The evidence: The economy grew 4.8 percent in the first quarter, and short-term activity indicators keep rising.
- —The catch: The IMF forecasts 3.3 percent and ECLAC 3.9 percent, so 4.5 is the employers’ own number.
- —What it would mean: At 4.5 percent, El Salvador would overtake Guatemala as Central America’s fastest-growing economy.
- —The agenda: Employers are using the good numbers to push flexible working hours, including four-day schemes.
- —What comes next: The government will analyse schedule changes; the current legal limit is 44 hours a week.
El Salvador’s industrialists say the economy could grow 4.5 percent this year, a rate not seen in decades. The El Salvador growth forecast came packaged with an employer push for more flexible labour rules.
What the industrialists announced
The forecast came from Jorge Arriaza, president of the Salvadoran Association of Industrialists. He spoke on Thursday at the opening of the Regional Energy Congress in San Salvador.
The congress, known as COREN, gathers the energy sector from across Central America. Arriaza used its opening ceremony to deliver the economic outlook.
Arriaza said short-term indicators justify the optimism. The industrial production index and the economic activity volume index are both climbing.
He called 4.5 percent a rate not seen in many years in El Salvador. He also dismissed analysts at home and abroad who say the country lacks economic direction.
The association, known by its Spanish initials ASI, is one of the country’s most influential business chambers. Its growth forecast carries weight with government and investors alike.
El Salvador is Central America’s smallest mainland country by area. Its economy has historically grown more slowly than its neighbours.
The head of the National Private Enterprise Association, José Luis Saca, backed the outlook. He said training qualified workers is the priority for sustaining it.
The numbers behind the El Salvador growth forecast
The economy expanded 4.8 percent in the first quarter of 2026, according to the Central Reserve Bank. That was above earlier estimates for the period.
Multilateral forecasters are more cautious than the ASI. The International Monetary Fund projects 3.3 percent for 2026, and the UN regional commission ECLAC projects 3.9 percent.
Both institutions have already raised their El Salvador growth forecast this year. The direction of revisions helps explain the employers’ confidence.
The central bank publishes the activity index every month. It has become the most-watched series in Salvadoran economics.
Across Central America, Guatemala is expected to grow about 4 percent. The rest of the region is forecast between 3 and 4 percent.
If the ASI figure proves right, El Salvador would lead the region. That would be a striking turn for one of its historically slower economies.
Guatemala’s own growth is driven by remittances and construction. Beating it would give the El Salvador growth forecast symbolic weight.
Employers seize the moment on labour rules
The growth talk arrives alongside a labour flexibility push. Business groups proposed flexible schedules to the Higher Labour Council in January.
Salvadoran law now sets the working day at eight hours and the week at 44. Employers argue that rigid schedules hold back productivity.
The government confirmed in August it will analyse changes to working time. Schemes on the table include longer days in exchange for a four-day week.
Supporters say compressed weeks suit factories and call centres serving United States time zones. Critics worry about longer shifts eroding rest and overtime rights.
Most versions discussed would keep the weekly hour total intact. What changes is how those hours are distributed across the days.
No bill has been presented yet. The debate is expected to intensify as the El Salvador growth forecast strengthens the employers’ hand.
What is driving the economy
Security is the backdrop to everything. The government’s crackdown on gangs has made streets safer and investment easier to sell.
Construction is one of the strongest pillars right now. The sector drew US$83.1 million of foreign investment in the most recent quarter.
The ASI also used the congress to launch its Industria Solar 2029 programme. It aims to expand solar power for industry over the next three years.
The association’s wider plan, called El Salvador Produce for the World, has presidential backing. It targets new productive sectors beyond textiles and coffee.
Remittances from Salvadorans abroad remain the economy’s backbone. They support the household spending behind much of the activity index.
Tourism has also recovered with the security gains. Surf beaches and volcano towns now draw visitors who once avoided the country.
Coffee and textiles once defined the export economy. Maquila factories in the free zones still employ tens of thousands of workers.
What it means for foreigners and investors
El Salvador uses the US dollar as its currency. That removes exchange-rate risk for American investors and retirees.
Faster growth, if it materialises, feeds straight into rents, wages and prices. Foreign residents will feel it first in the cost of services.
For investors, the labour proposals matter as much as the headline rate. Flexible schedules could cut operating costs for export businesses.
The risk is expecting too much. The gap between the ASI’s 4.5 percent and the IMF’s 3.3 percent is the honest measure of uncertainty.
The country has courted crypto and technology investment since adopting bitcoin as legal tender in 2021. That bet raised its international profile more than its output.
What to watch from here
The second-quarter GDP reading will test the El Salvador growth forecast. A figure near 4.8 percent again would strengthen the employers’ case.
Watch the monthly activity index published by the central bank. The ASI built its 4.5 percent on exactly that series.
Watch also the first projects under the solar industry programme. Energy costs are a recurring theme in the association’s own congress agenda.
The labour file will move through the Higher Labour Council. Any four-day-week pilot would signal how far reform will go.
Finally, watch Guatemala’s numbers. The regional leadership claim only matters if the larger neighbour stays below 4.5 percent this year.
Frequently Asked Questions
Who forecast 4.5 percent growth for El Salvador in 2026?
Jorge Arriaza, president of the Salvadoran Association of Industrialists, made the forecast on 27 August 2026 at the Regional Energy Congress. He based it on the industrial production and economic activity indices.
How does the El Salvador growth forecast compare with official ones?
It is more optimistic. The International Monetary Fund projects 3.3 percent and the UN commission ECLAC 3.9 percent for 2026, while the economy grew 4.8 percent in the first quarter.
What labour changes are Salvadoran employers proposing?
Business groups have proposed flexible working schedules to the Higher Labour Council, including longer daily hours in exchange for a four-day week. The law currently sets eight hours a day and 44 hours a week.
Sources: Diario El Salvador, 27 August 2026; Derecho y Negocios; Contrapunto, 21 January 2026; Revista E&N, 20 August 2026. El Salvador uses the US dollar.
This article was produced by The Rio Times’ automated newsroom system. How we use AI · Report an error
Read More from The Rio Times