Country Forecast El Salvador 3rd Quarter 2018

Country Forecast El Salvador 3rd Quarter 2018

  • July 2018 •
  • Report ID: 5137045 •
  • Format: PDF

Policy towards private enterprise and competition


2018-19: Funding for small and medium-sized enterprises (SMEs) through state-run banking institutions will continue.


2020-22: The favoured system of public-private partnerships will provide some limited investment opportunities in road-building, energy and tourism. However, wrangling over terms will continue to delays the granting of concessions.


Policy towards foreign investment


2018-19: Policies to attract foreign direct investment remain in place, but there will be prioritisation of local SMEs.


2020-22: US development aid will increase owing to initiatives to tackle emigration and drug-trafficking. A new government in 2019 will give fresh impetus to securing investment, boosting ties with the US, the EU, Brazil, Colombia and China.


Foreign trade and exchange controls


2018-19: Regional integration increases as regional, EU and US-backed initiatives to cut red tape ease obstacles to trade.


2020-22: Drive to expand trade links with the EU and other Latin American and Asian economies continues.


Taxes


2018-19: Tax revenue growth slows as reforms stall, but measures to reduce domestic evasion will boost revenue.


2020-22: The government will develop a fiscal responsibility framework with the IMF that will bring greater certainty to future tax policy. A new stand-by arrangement with the Fund will be avoided in order to prevent accompanying austerity measures.


Financing


2018-19: Global instability and high domestic premiums keep credit growth slow, and interest rates above global averages.


2020-22: Persistent but declining security concerns will continue to add an extra risk premium on borrowing rates. Bank lending will rise for medium- and longer-term financing.


The labour market


2018-19: Migration to the US slows as tougher US immigration policy takes effect. Skilled labour remains scarce and increased government intervention in labour relations is likely.


2020-22: Efforts to create jobs under development initiatives will be offset by tepid growth and a slowdown in 2020.


Infrastructure


2018-19: Delays continue in kick-starting major port redevelopment. Road redevelopment continues under public-private funding initiatives. Emphasis on improving rural roads. Access to foreign funding constrained by concerns over sovereign risk


2020-22: Airport redevelopment gathers pace and work on the country's fifth hydroelectric plant is completed.


Technological readiness


2018-19: Investment in 4G mobile spectrum will widen the reach of Internet connectivity and lower costs.


2020-22: Plans to increase the renewable energy supply, focusing on solar and wind power, will advance.



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