Macroeconomic Forecast El Salvador

El Salvador's foreign reserves grew a mere 5.2% y-o-y in September, while in monthly terms reserves actually shrunk from US$3.4bn in April to US$2.6bn as of September, adding significant downside risk to our end-2011 reserve forecast of US$3.5bn. While trade data is not yet available for September, the August reserves figure represented only 3.1 months of reserve cover, down significantly from 4.2 months in April, adding yet another degree of macroeconomic instability, especially given El Salvador's precarious balance of payments position.

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