Moody’s Ratings has revised El Salvador’s sovereign outlook to positive from stable, citing stronger fiscal performance in 2025 and improved financing dynamics. The agency affirmed the country’s B3 credit rating, pointing to a notable reduction in the fiscal deficit as a key driver behind the decision.
The deficit is estimated to have narrowed to 3% of GDP by the end of 2025, a decline of 1.5 percentage points from the previous year. Moody’s projects the deficit will fall further to 2.3% in 2026 and 2.2% in 2027. “Based on fiscal results through November 2025, we estimate that the deficit declined to 3% of GDP by year-end and will continue to narrow over the coming years,” the agency said.
Fiscal consolidation has been supported by tighter spending controls, reductions in the public wage bill, and stronger revenue collection. Enhanced customs enforcement, wider use of electronic invoicing, and measures to broaden the tax base have boosted government income, while public investment continued to expand—particularly in infrastructure—supporting construction activity and economic growth. Real GDP growth is estimated to have accelerated to 4% in 2025, up from 2.6% in 2024.
Moody’s also noted progress under El Salvador’s International Monetary Fund program, highlighting reduced short-term financing pressures. “We estimate that financing needs will decline to 9.1% of GDP in 2026, down from 9.8% in 2025 and 18.3% in 2024. Continued progress will reduce government liquidity risks,” the agency stated. However, it cautioned that debt levels remain high, with the debt-to-GDP ratio at 88.3% in 2025, and improvements are expected to be gradual through 2028.