El Salvador - GFDRR

106 | El Salvador: Damage, Loss, and Needs Assesment
As a result of the deep contraction in internal demand, as well as a nearly 50% reduction in the petroleum
bill, it is estimated that imports of goods will contract by about 25%. In terms of volume, the
principal reductions were observed in imports of durable goods as well as capital goods. Consequently,
for the entire year it is expected that the deficit in the balance of goods and services will decrease by over
US$1.7 billion, reaching US$3.26 billion (14.9% of the GDP).
In contrast to the above, a slight increase in the deficit of the revenue balance is expected, and a reduction
of about US$400 million in flows of remittances, which represent approximately 16% of the GDP.
Thus, it is estimated that the deficit in the current account will decrease by over US$1.2 billion, reaching
US$418 billion, a figure equivalent to 2% of the GDP. In terms of DFI, it estimated that in 2009 the flow
toward El Salvador would be reduced by approximately US$700 million, whereby only US$88 million
would have been received in 2009.
For 2010, a normalization and a reactivation of both external and internal demand is forecasted,
which implies that net exports will again become negative. Although an increase in the flow of remittances
is expected, these will be insufficient to avoid a slight increase in the current account deficit, which
will reach a level equivalent to 3% of the GDP.
c) Expected Economic Evolution in 2009 after the Disaster
i) Key trends. The November 2009 floods caused by Hurricane Ida per se do not represent a problem of
imbalance in key macroeconomic aggregates. 47 However, the GDP may experience a drop, depending
on the speed of reconstruction works. In fact, considering the expansion of external demand through
construction and the possible increase in remittances, a certain boost in economic activity may be
expected by late 2009 and especially in early 2010.
Thus, in the baseline scenario (which has a greater probability of occurrence), a 2.54% decrease in
the GDP for 2009 is observed. For 2010, it is estimated that recovery may occur, with a 1% growth until
reaching a 4% increase in the GDP in 2014. Here, it should be noted that, taking into account the effects
of the disaster caused by Hurricane Ida, we will have a decrease in the GDP of only 0.07% in 2009, while
reconstruction efforts and a greater boost in consumption would provide gains of nearly 0.5% in the GDP
for 2010, later adjusting to their trend by 2014.
However, if one considers the disasters that have occurred from 1982 to the present one in 2009 (six
events), an accumulated reduction in the GDP over this period, equivalent to 0.9%, can be observed.
Although the impact seems relatively minor, this has misaligned the country’s path toward theoretical
equilibrium in the long term and has limited its possibilities for potential growth (see graph 11) 48 .
47
The cumulative effects of disasters and their inter-temporal dynamics have effects that can be quantified using techniques
whose application is beyond the purpose of this document.
48
The data in this graph come from preliminary estimates for both, and thus may not adequately represent the reality
but rather a GDP trend, and thus the results obtained in this exercise should serve merely as an approximation and may
change subject to the availability of more recent information.