El Salvador received encouraging economic news this week as Moody’s Ratings upgraded the country’s sovereign outlook from stable to positive, while reaffirming its B3 rating. The change reflects what the agency describes as a clearer, stronger fiscal path and a more confident macroeconomic outlook for the years ahead.
Moody’s highlighted several key factors behind the upgrade: ongoing fiscal consolidation, stronger liquidity buffers, and a steady reduction in the government’s financing needs. Together, these shifts are gradually strengthening El Salvador’s financial position and improving its overall credit profile.
A major part of this progress comes from fiscal performance in 2025. Based on data through November, Moody’s estimated that the fiscal deficit fell to 3% of GDP, down 1.5 percentage points from the previous year. The agency expects the deficit to keep narrowing in 2026 and 2027. This improvement has been driven by tighter control over current spending and higher tax revenues supported by electronic invoicing and a broader tax base.
Importantly, Moody’s noted that these adjustments have not slowed economic activity. Public investment has continued—especially in areas such as construction—helping to support growth. Real GDP expanded by about 4% in 2025, and the agency forecasts 3.1% growth in 2026, which would remain above the country’s recent trend.
Moody’s also pointed to structural improvements in domestic security, which have encouraged private investment and strengthened growth dynamics. At the same time, the government’s financing needs have dropped sharply—from 18.3% of GDP in 2024 to a projected 9.1% in 2026—reducing liquidity risks and reinforcing overall financial stability.
The decision follows a rating committee meeting held on February 3, where Moody’s concluded that El Salvador’s fiscal and financial fundamentals have improved significantly. For the country, the positive outlook signals growing international confidence and a more stable foundation for the coming years.
If our stories resonate with you, we’d love to hear from you in the comments. You can also subscribe to our blog at no cost. We welcome optional donations to help maintain the site, but subscriptions are always free and never tied to any contribution.
Leave a Reply