The inflation rate in El Salvador has been on a downward trajectory for the past 10 months, with June marking a significant milestone. According to data from the Central Reserve Bank (BCR), the inflation rate for June stood at 3.78%, continuing the trend of decreasing inflation since August 2022 when the rate reached 7.66%. This represents a difference of 3.88%.
The consistent decline in inflation in the Salvadoran economy has been evident in recent months. In June, the inflation rate dropped by 0.63 percentage points compared to May, where it stood at 4.41%. This marks the tenth consecutive month of inflation reduction since August 2022, when the rate reached its peak at 7.66%.
Analyzing the inflation rates reported by the BCR over the past 10 months, in August 2022, the country recorded 7.76%. In September 2022, it decreased to 7.49%, followed by 7.47% in October and 7.32% in both November and December.
It is worth mentioning that El Salvador ended last year as the Central American nation least affected by inflation.
From January onwards, the inflation rates continued to decline, with the state bank reporting 7.03% in January, 6.82% in February, 6.06% in March, 5.44% in April, 4.41% in May, and finally, 3.78% in June.
This decline aligns with the BCR’s forecast at the end of 2022, which predicted that inflation would stabilize around 3% for this year. This outcome can be attributed to the measures implemented by President Nayib Bukele’s government to curb the escalation of international prices and reduce the intensity of global economic shocks.
Among the measures taken by the government since 2023, temporary price controls on electricity, fuel, and liquefied petroleum gas (LPG) have been implemented. Import duties have been waived for around thirty food products and agricultural inputs, and nationwide price checks have been conducted among all stakeholders in the supply chain, among other initiatives.
Ricardo Salazar, the president of the Consumer Protection Agency, emphasized the significance of this downward trend as it positively impacts the population’s living conditions. He highlighted a decrease in the prices of essential goods and services.
«We view this downward trend in prices over the past 10 months as highly positive. Particularly, we have seen a downward trend in important sectors such as electricity, water, gas, fuel, household items, telecommunications, recreation, and culture,» said Salazar.
Regarding food prices, Salazar noted that they have decreased from 14.5% in August 2022 to 6.93%, slightly over half of the initial rate. He attributed this decline to the reduction in input prices and stability in fuel costs.
Meanwhile, the Consumer Price Index (CPI) registered until May 2023 stood at 128.88, reflecting a monthly decrease of 0.07%. This represents a 0.02 percentage point decrease compared to April of the same year.
Furthermore, the accumulated inflation data for the CPI until May 2023 was 0.86%, which is 2.81 percentage points lower than the same month the previous year when it was 3.68%.
This behavior has been driven by a slower pace of price variations, contributing to maintaining a relatively lower level of inflation compared to May of the previous year, according to the BCR.
When analyzed in detail, May showed a smaller monthly variation compared to the same month of the previous year when the growth rate was 0.91%. This was primarily influenced by food and non-alcoholic beverages, furniture, household goods, diverse goods and services, and education.
According to the BCR, the top five products that had a positive performance were powdered milk, fresh cheese, pupusas (a traditional Salvadoran dish), toilet soap, among others.
REGIONAL CONTEXT
In a Central American context, El Salvador remains one of the least affected nations, second only to Costa Rica, which recorded a rate of -1.04% at the end of May, according to a statement from the Central Bank of Costa Rica (BCCR).
Following behind is Guatemala with a rate of 4.93%, Honduras with 5.60%, while Nicaragua continues to be the most affected country in the region, with an inflation rate of 9.87%. Nicaragua has been hovering around a 10% inflation rate since the second half of 2022 and has not achieved a significant decline since then.
Honduras, on the other hand, which also experienced double-digit inflation rates last year, is now in a better position, according to data from the Central Bank of Honduras (BCH).
In conclusion, El Salvador’s continuous reduction in inflation over the past 10 months is a positive development for the country’s economy and the well-being of its population. The government’s proactive measures to control prices and stabilize the economy have yielded significant results, positioning El Salvador as one of the least affected nations in the region.