In 2001 the Salvadoran economy continued to slow down for the fourth year in a row, with GDP growth reaching only 1.8%; as a result, there was almost no growth in per capita output. The adverse situation of the world economy was reflected in a decline in maquila exports and a drastic fall in international coffee prices, which eroded the terms of trade. The country was hit at the beginning of the year by two earthquakes, and later by a serious drought. A steady stream of family remittances, however, equivalent to 14% of GDP, and an increase in public investment for rebuilding damaged areas staved off a more serious contraction in domestic demand, although public finances became more fragile. Meanwhile, inflation remained under control and exhibited a downward tendency, encouraged by the entry into force of the Monetary Integration Act, which fixed the exchange rate and established the United States dollar as the unit of account.

Related Subject(s): Economic and Social Development
Countries: El Salvador
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