Forecasting Poor Economic Times in El Salvador

Berlin, El Salvador 2004

Poverty trends in the 2000’s can be divided in two periods: a poverty reduction phase until 2006 and the reverse of the tendency in 2007-2008. In the first phase of the cycle poverty fell 8.6 percentage  points. This phenomenon was even stronger in rural areas (decreased 17.4 percentage points), and also lead to a more equal income distribution. In 2007-2008, the food crisis hit El Salvador hard, and almost all the gains in terms of poverty reduction were lost. The poverty headcount rate increased from 35.5 percent in 2007 to 42.3 in 2008, reaching the highest ratio since 2002...

And then there's this.

The debt sustainability analysis (Table A.l) indicates that the public debt to GDP ratio is expected to continue on an increasing path until 2011, when it will reach 50.1 percent o f GDP before starting to decline to reach 46.2 percent in 2014.

These paragraphs were published by the World Bank in 2009. Maybe President Funes hasn't handled the economic crisis in El Salvador that well (O'Grady). However, economic conditions worsened beginning in 2006. (See Tim's post and my earlier post on the subject).

The World Bank even predicted, well before Funes took office, that conditions were likely to deteriorate well into the next administration's five-year term. One needs to evaluate Funes' handling of the economy from the baseline that conditions were bad and getting worse. O'Grady sort of does this by blaming Saca as well but that is not what the story's headline indicates.

Given the worsening economic situation that Funes inherited upon taking office (heck, it's one of the issues that got him elected in the first place), how well has he done to stop the bleeding and turn things around. He might not get high marks, but it's a different story than "he's ruining everything good that ARENA had built up over twenty years in office."