The State of the Economy
Roberto Murray Meza
After more than twenty-five years of uninterrupted growth (at an average annual rate of 5 percent in real terms), the economy of El Salvador entered the 1980s in a virtual free-fall.From 1979 to 1982 real GDP dropped 22 percent and fell well below the overall level of output achieved in 1974. During the same period, real income per capita declined 27 percent; this pushed average incomes lower than levels achieved in 1964. Over the rest of the decade, the economy limped along, growing at an average annual rate of only 1.5 percent. El Salvador ended the decade with a GDP 13 percent below its high point eleven years earlier.
One area that epitomizes the overall economic decline in the 1980s is export performance. From 1977 through 1980 exports averaged $1 billion per year and exceeded imports in three of those four years. After 1980, however, exports dropped almost steadily to less than $500 million in 1989. Even with the remarkable 17 percent surge in 1990, the value of export revenue is still only about one-half of that registered in 1979, El Salvador's peak year for exports.
Not only did the Salvadoran economy suffer the consequences of a major drop in export earnings, but it also missed out on the potential benefits of what could have been a major expansion of exports to world markets.After the downturn at the beginning of the decade, the world economy experienced one of its longest periods of continuous growth in history. Several of El Salvador's Central American neighbors, includ‐____________________