Macroeconomic Forecast El Salvador

BMI View: El Salvador's economy remains one of the poorest in Central America, implying it will be one of the hardest hit by the recent spike in inflation. Consumer price inflation hit 6.7% y-o-y in May 2011, and as a result we believe that the lending rate is unlikely to fall significantly from its 6.3% high in April, which in turn is likely to further cap consumer and commercial credit. Nevertheless, as supply-side pressures ease heading into H111, we expect consumer prices to cool somewhat, in line with our end-2011 inflation projection of 4.2%.

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