By Lara Holmes

The international landscape is complicated, but the Government of El Salvador expects new policies, institutions and programs to move the country's economy forward. Although there are strong bets, the challenge to improve public finances is still pending.

The Salvadoran economy will grow again almost zero: the official growth target is 2%. In the midst of a complicated international situation, Alex Segovia, head of the Technical Secretariat of the Presidency (STP) said that in 2012 domestic production (measured by gross domestic product, GDP) would grow from 1.99% to 2.5% .

 

This figure is under review by the International Monetary Fund (IMF), which monitors closely the implementation of these goals to maintain precautionary loan agreement (or SBA, as it is called in English).

 

A mission of the agency is in the country, precisely to address the issue with officials. The SBA ends this year.

Even with these projections, El Salvador will continue to lag behind its Central American neighbors in growth.

In 2011, GDP increased 1.5% over 2010, although Segovia said that without the Tropical Depression 12-E, the country would have grown by 2.2%. Anyway, it still would not have met SBA scheduling, where they established a variation of 0.3% higher.

The Government has committed to decrease about $300 million in deficit, ie the imbalance between total revenue over expenditure. Last year, the SBA goal in spending exceeded the forecast, largely because of the consequences of 12-E.

He explained that with the reforms in place since January, more than other measures of rationalization of expenditure may be adjusted as intended.

The fiscal 2011 deficit was 4.2%, or $906 million. This year they expect to close at more than $600 million, or about 2.7% of the deficit relative to GDP.

It has been said they will begin with the rearrangement of subsidies until after the election, so that way they will have nine months to correct the gap in public finances.

Ultimately, the goal is to add tax revenue equivalent to 15.9% of GDP, and go up between $281 million and $352 million.