The BCR reported a -10.2% contraction in gross domestic product in the third quarter of the year, representing six consecutive months of negative growth.
El Salvador’s economy is officially in recession after experiencing six consecutive months of negative growth by registering a -10.2% contraction in gross domestic product (GDP) in the third quarter of the year, according to data from the Central Reserve Bank (BCR).
In the first quarter of 2020, GDP grew by 0.8%, but in the second it fell by -19.22% and the gloomy outlook remained at -10.2% for the next three months between July and September.
Popularly known as the ‘Lean Period’, the recession has been the product of the shutdown of thousands of businesses causing more than 85,000 layoffs, cutting consumption and in turn straining investment as part of a long incarceration applied by the government since March due to the COVID-19 pandemic.
In its report, however, the BCR said that the -10.2% contraction shows “an unprecedented recovery in the 2005-2020 series” as it considers this to be lower than in the second quarter.
Experts had been warning of this economic situation since the end of September, but at the time the BCR had not yet published any official data.
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At the time, the former head of that institution and chairman of the Foundation for the Development of Central America (FUDECEN), Oscar Cabrera, estimated that economic output fell by 13.7% between April and May and for the third quarter from July to September. The decline was predicted to be -9.4%, despite official data showing a -10.2% contraction in the latter period.
Despite the fact that the economy has started to gradually open since July, companies are not recovering. El Salvador’s Chamber of Commerce and Industry confirmed last September that sales remained at 50% and even now there are companies that have not been able to open or recruit staff.
“The economy has not stopped declining,” Waldo Jiménez, economic manager of the National Association of Private Enterprise (ANEP), said on the occasion.
And he confirms that this will be maintained for the rest of 2020, as a coronavirus vaccine has not yet been confirmed and Salvadorans will have to learn to live with it.
Cabrera pointed out that in 2009, when a financial and economic crisis started, it took the country four years to regain the number of jobs it had in 2008, but now, with this recession, it is likely that El Salvador will reach 10 takes years to recover.
“The consumption and investment costs are recouped after four years. Now we can take a decade, because as the pandemic continues, all the countries of the world will reduce their commercial channels, ”he explained.
The 2020 economic and fiscal situation report presented by the National Development Foundation (Funde) confirmed that El Salvador is still not showing an economic recovery from a year-over-year perspective; According to the Economic Activity Volume Index (IVAE), there was a 8.1% decline in economic dynamics from September onwards compared to the same month of the previous year. In terms of gross domestic producer (GDP), the second quarter showed a contraction of 19.2%.
De Funde explained that the effects of the pandemic have spread to all economic sectors, the most affected of which are trade, construction, professional services and industry, with economic activity declining 19.84%, 19.48%, 11.24% and 9.63%, respectively.
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