El Salvador - Current economic position and prospects

RESTRICTED Report No. CA- 12a ADIEL7. '4AJ7 A X Tvs eport is fnr Mf,i:a!u nb by the Rankd Group and spifially authoried orgnifations or persons. It may not be published, quoted or cited without Bank Group authorization. The Bank Group does not accept responsibility for the accuracy or completeness of the report. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION CURRENT ECONOUMiC POS-I T IJION AND PROSPECTS OF EL SALVADOR September 24, 19711 Central America and Caribbean Department  T'f'%TTrTT A 71T IlC' Currency US$1 .00 = C2.50 (Colones) C1 = US$o.h4 Cl million = US$L400,000 Measures and Weights 1 coffee bag = 60 kilograms (kg.) = 132 pounds 1 quintal = 46 kilograms (kg.) = 101.4 pounds 1 manzana = 0.69 hectares (ha.) = 1.727 acres 1 cotton bale= 480 pounds  TABLE OF CONTENTS Page No. BASIC DATA MAP SUMMARY AND CONCLUSIONS ................. i RESUMEN Y CONCLUSIONES ...................... v I. GROWTH PERFORMANCE AND PROSPECTS ............. 1 Background ...................1................ The Government's Role .... ............... 1 Regional Developments .... ............... 2 Overall Trends ...... ......................... 3 Past Developments .................... 3 Growth Prospects and Development Strategy 5 II. PUBLIC INVESTMENT AND FINANCE .... ............ 10 Public Investment: Recent Trends and Programs 10 Financing of Public Investment .... ........... 13 III. MONEY AND CREDIT. AND BALANCE OF PAYMENTS .... 23 Recent DeveloDments ..... ..................... 23 PrnnnprtR and Creditworthiness ....... 27 APPENDIX: SECTORAL DEVELOPMENTS AND GOVERNMENT POLICIES Agriculture, Livestock and Fisheries ......... 1 Manufarturing ............., 7 Tourism ...................................... 11 Power ........ 12 Transport and Communications ............. .... 12 Population; Emnlovment. and Social Sectors ... 13 This report is based on the findings of an economic mission to El Salvador in March 1971, composed of Mr. Elio U. Gonella (rhipf)- Mrs= Herminina M. Neufeld (Industrial Economist), Mr. Pedroleon Diaz (Loan Officer), Mr. Jose nDatasr-PannAero (TLoar. Officer), Mr. Williamn A. Warvd (Agricuiltuiiral Ecor.om4st), and Prof. Raymond Richman (Consultant - Fiscal Economist). This report Tas revie-ed by the E-on^-4^r.omi C or. Au..as- 24. 1Q71  1AbLE uOF CUNIENTS IUont a) STATISTICAL APPENDIX 1. Population and Employment .2. National Accounts 3. Balance of Payments and External Trade 4. External Debt 5. Public Sector Finances 6. Money and Credit 7. Agricultural Statistics 8. Industry and Other Sectors 9. Prices and Wages 10. Education and Health  EL SALVADOR BASIC DATA I. SIZE Area (square kilometers) 29,900 1960 1965 1969 1970 Population (million) 2.50 2.93 3.42 J 3.5611 Annual growth rate (o/o) 2.8 3.7 4.7 4 4.1 / GNP (factor cost) per capita (US$) 226 271 276 283 II. ECONOMIC INDICATORS GDP at current factor cost (millions of olones) 1j303 1;823 2j217 2;337 Sector origin (o/o) 100 100 100 100 Agriculture 3 7 29.1 297T 277 Mnnnf' m'+.irrri a1l.6 17.7 19.6 19.5 Construction 3.3 3.1 2.6 2.7 Crmenrce 00 I 01 0 09 0 01 0 Other 28.2 25.9 28.8 29.3 Annual ChanRes (o/o) 1961-68 1969 1970 GDP at cuirrent market+ price 6.1 3,9 6.6 GDP at constant market prices 2/ 6.3 4.2 4.8 Manufeacturng valune-added (constat prices) 9.7. 7. Agriculture value-added (constant prices) 3.4 .. ExpoIts f.o..b. 93 =14.7 1314 Imports, c.i.f. 9.7 -3.3 2.0 Total 'barvir.g systen credit 4.8- 15.1- r0.5 to public sector (2.5) (11.2) (18.4) to private sector (6.7) (73 ( Consuumer prices 0.4 -0.2 2.8 GDP at current market prices (millions of Colones) 1,420 1,992 2,382 2,538 o/o of GDP at current market prices: Gross fixed investment 14.4 14.9 11.5 1114 Public sector (2.9) (4.1) (2.7) (2,7) Private sector (11.5) (10.8) (8.8) (8,7) Inventory investment 1.1 0.5 1.0 0,6 Gross domestic savings 11.0 13.0 9.9 11,7 Public sector (3.0) (3.5) (2.1) (2.4) Private sector (8.0) (9.5) (7.8) (9.3) Resource gap (surplus -) 4.5 2.4 2.6 -0.3 1 Including about 70,000 refugees from Honduras in late 1969 and in 1970. 2/ iased upon GDP price deflator whieh is currently unrler review.  BASIC DATA (cont;d) 1960 1965 1969 1970 Public Sector Finances (in millions of Colones) Current revenue 395 359 393 (o/o of GDP at current factor cost) (21.7) (16.2) (16.8) Current expenditure 224 310 332 (o/o of GDP at current factor cost) (12-3) (14.0) (14.2) Current surplus 71 49 61 Investment expenditure 91 90 88 Surplus/Deficit -20 -41 -27 Net external financing 36 32 7 Net domestic financing -16 9 20 Balance of Payments (in millions of US$) Exports of goods and non-factor services 116 21? 222 254 Imports of goods and non-factor services 142 231 247 257 Resource gap 26 19 25 3 Factor income, net 3 7 8 8 Current account deficit 29 26 33 11 Transfers, net 3 13 14 12 Private capital, net 4 9 1 11 Official capital, net - 14 13 3 Reserve changes, net 22 -10 5 -15 Concentration of Commodity Exports (o/o of exports, f.o.b.) Coffee 66 51 43 50 External Public Debt Medium and long-term outstanding as reported to IBRD (including undisbursed, repayable in local and foreign currency, in millions of US$) 105 15L 157 Debt service ratio (% of foreign exchange earnings) 3.8 3.3 4.3 Net foreign exchange reserves of the banking system (MS$ millions) 15 51 56 63 uv