IMF Projects El Salvador Economy to Grow 4.5% This Year
EL SALVADOR · ECONOMY
Key Facts
- —What is happening On Tuesday, 13 October, the International Monetary Fund’s October World Economic Outlook projected El Salvador’s economy to grow 4.5% in 2026, up from an estimated 3.9% in 2025 and faster than any year from 2022 to 2025.
- —Why it matters El Salvador uses the US dollar and has no currency of its own, so its growth is tied to US interest rates, jobs and remittances, and the forecast is among the strongest in Central America.
- —The numbers The IMF sees growth easing to 4.0% in 2027, inflation of 2.7% in 2026 after about 0.3% in 2025, and gross government debt at 85% of output this year, rising to about 89% in 2027.
- —Who is who The IMF lends to President Nayib Bukele’s government under a 40 month programme worth about US$1.4 billion, approved in February 2025, and released a further US$138 million earlier this month; businesses no longer have to accept Bitcoin.
- —What to watch IMF staff reviews under the loan programme, each tied to further payments, and quarterly output data from the central bank, the Banco Central de Reserva, will show whether growth is on track, while lawmakers weigh the 2027 budget.
- —What it means for you For US investors, a dollarised economy removes currency risk though high debt carries a cost, and stronger growth can ease migration pressure and lift demand for US goods sold under the Central America and Dominican Republic free trade agreement.
The International Monetary Fund’s new global outlook projects El Salvador’s economy to grow 4.5% in 2026. That would beat every year from 2022 to 2025 in the Fund’s figures, in a country that uses the US dollar.
The IMF projected 4.5% growth for El Salvador this year in its October World Economic Outlook, released on Tuesday, 13 October. The figure appears in the Fund’s World Economic Outlook database, published during its annual meetings in Bangkok.
El Salvador adopted the US dollar as legal tender in 2001 and has no currency of its own. That ties its economy closely to US interest rates, US jobs and the money Salvadorans in the United States send home.
What the October Outlook Shows
The Fund puts El Salvador’s real output growth at 4.5% in 2026, up from an estimated 3.9% in 2025. Growth is then seen easing to 4.0% in 2027 and to about 3.3% a year from 2028 in the same database.
The new figure marks a clear step up from recent years. The IMF’s series shows growth of 2.9% in 2022, 3.4% in 2023 and 2.6% in 2024.
The 2026 estimate is among the strongest in Central America in the same report. The Fund projects 4.0% growth for Guatemala and 3.3% each for Honduras and Costa Rica, while Panama is seen growing 5.0%.
Prices, Jobs and Debt
Consumer prices are expected to rise faster than last year but remain low. The IMF sees average inflation of 2.7% in 2026, after about 0.3% in 2025.
The unemployment rate is projected at 4.3% this year, close to the 4.2% estimated for 2025. On the Fund’s numbers, joblessness then drifts up slowly to 4.8% by 2030.
Public debt remains the heaviest weight on the outlook. The Fund estimates gross government debt at 85% of economic output in 2026, before a rise to about 89% in 2027.
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The IMF Loan Programme and Bitcoin
El Salvador is in the middle of a 40-month loan programme with the IMF worth about US$1.4 billion, approved in February 2025. The deal ties each payment to targets on the budget, public debt and financial transparency.
The Fund’s board released a further US$138 million under the programme earlier this month. Under the deal, businesses no longer have to accept Bitcoin, though the state keeps adding it to reserves.
A Dollar Economy Tied to the United States
Because El Salvador uses the dollar, it cannot devalue to boost exports or set its own interest rates. Its borrowing costs and spending power therefore move with decisions taken by the US Federal Reserve.
The United States is El Salvador’s largest trading partner and home to a large Salvadoran diaspora. Money sent home by workers in the US is one of the country’s biggest sources of income and supports household spending.
Security has also changed the investment picture under President Nayib Bukele. His government credits mass arrests of alleged gang members for a sharp fall in homicides, while rights groups criticise the detentions.
What It Means for US Readers
A 4.5% forecast points to a faster-growing partner in Central America, a region close to US supply chains and migration routes. For US investors, a dollarised economy removes currency risk, although high public debt still carries a cost.
Stronger growth at home can ease some of the economic pressure that pushes Salvadorans to migrate north. It can also lift demand for US goods sold under the Central America and Dominican Republic free trade agreement with Washington.
What Is Not Known
The IMF database does not publish a written explanation for El Salvador’s 4.5% figure. It is not clear which assumptions on remittances, tourism, public investment or US demand drive the estimate.
The Fund’s April forecast could not be checked at the source on Tuesday, so no comparison is made here. The government’s own 2026 estimate and any official reaction were not available at the time of writing.
What Comes Next
IMF staff will keep reviewing El Salvador’s progress under the loan programme, with each review tied to further payments. Quarterly output data from the central bank, the Banco Central de Reserva, will show whether the economy is on track.
Lawmakers are also weighing the government’s budget bill for 2027. A projection is not a guarantee, and actual growth will depend on US demand, remittance flows and the global economy.
Frequently Asked Questions
Does El Salvador use the US dollar?
Yes, El Salvador adopted the US dollar as legal tender in 2001 and has no national currency. Bitcoin was added as legal tender in 2021, but a 2025 reform ended the obligation for businesses to accept it.
What growth does the IMF forecast for El Salvador?
The IMF’s October outlook projects El Salvador’s economy to grow 4.5% in 2026. It sees growth slowing to 4.0% in 2027.
What inflation does the IMF expect?
The Fund projects average consumer price inflation of 2.7% in 2026. That compares with about 0.3% in 2025.
Why does this matter for the United States?
El Salvador is a dollarised economy closely linked to US trade, investment and remittances. Its growth affects migration pressure and demand for American goods in Central America.
Is El Salvador’s public debt a concern?
The IMF estimates gross government debt at about 85% of economic output this year. That level is high for an emerging economy and is a core focus of the IMF loan programme.
Sources: IMF World Economic Outlook database, El Salvador; IMF World Economic Outlook, October 2026; Banco Central de Reserva de El Salvador (all accessed 13 October 2026).
This article was produced by The Rio Times’ automated newsroom system. How we use AI · Report an error · Editorial responsibility: Matthias Camenzind, Editor-in-Chief