Publication: Unleashing Central America’s Growth Potential: El Salvador
Date
2021-07-16
ISSN
Published
2021-07-16
Author(s)
Ulku, Hulya
Zaourak, Gabriel
Abstract
Although El Salvador’s modest pace of
growth has reduced poverty and inequality in recent years,
it has not been sufficient to move the country toward the
income levels of wealthier economies. The objective of this
study is to investigate the drivers and constraints of
growth and productivity in El Salvador from 1990 to 2017 and
explore areas with high growth potential. The value added of
this study is to provide an in-depth analysis of the drivers
and constraints of El Salvador’s growth using a wide range
of analytical tools. Historically, El Salvador’s growth is
driven by factor accumulation, both labor and capital, and
not overall productivity. The binding constraints for growth
are identified as: (i) security, (ii) innovation, (iii)
human capital, (iv) property rights, (v) limited access to
finance for small firms, and (vi) corruption. Higher
productivity and output growth can be achieved through
quality upgrading and an export diversification strategy
focused on metal, plastic, and chemical products. The
country’s strategic location with access to many markets, a
growing labor force, and a solid industrial base can support
the expansion of the tradable sector to achieve higher and
more inclusive growth. Development goals can be achieved
with a long-term commitment to structural reform and investment.
Citation
“Ulku, Hulya; Zaourak, Gabriel. 2021. Unleashing Central America’s Growth Potential : El Salvador. © World Bank, Washington, DC. http://openknowledge.worldbank.org/handle/10986/35976?show=full License: CC BY 3.0 IGO.”