El Salvador is projected to close 2025 with the lowest inflation rate in Latin America, according to new estimates from the International Monetary Fund (IMF). The organization’s latest economic outlook, released on October 14, places the country at just 0.3 percent annual inflation, the lowest in the region.
The projection represents a significant shift from recent years. Inflation in El Salvador peaked at 7.2 percent in 2022 amid soaring global food and fuel prices triggered by Russia’s invasion of Ukraine. Rates then eased to 4 percent in 2023 and 0.9 percent in 2024, nearly returning to pre-pandemic levels.
Economists emphasize that maintaining low and stable inflation is key to economic health, as both high inflation and deflation distort price dynamics and growth. According to the IMF, Panama is the only Latin American country expected to end 2025 in deflation at -0.1 percent. Costa Rica would follow El Salvador with the second-lowest inflation at 0.4 percent, while Ecuador is projected at 1.1 percent. In Central America, Guatemala is forecast at 1.7 percent, Nicaragua at 2 percent, and Honduras at 4.6 percent, the highest in the isthmus.
The IMF highlighted that the recent global tariff shock has been less disruptive than anticipated, partly because households and businesses accelerated purchases and investments ahead of potential export costs. The report stated that “delays in the implementation of recently announced tariffs allowed companies to postpone price increases while awaiting clarity on when and how much the tariffs would rise.”
Locally, data from El Salvador’s Central Reserve Bank (BCR) shows that inflation returned to positive territory in September at -0.36 percent, after five consecutive months of deflation. The shift was driven in part by higher prices in the food and nonalcoholic beverage category, which rose 0.53 percent after nearly a year of declines. Items that saw the largest increases included tortillas, meals, and native corn, in addition to construction services and rental housing. Meanwhile, travel services, tomatoes, potatoes, regular gasoline, and carrots fell in price.