El Salvador: On inequality, COVID-19 and growth

Abstract

Here we consider i) the relevance of the inequality that arises from the application of a growth strategy in El Salvador, and ii) the way in which the COVID-19 shock can be integrated into a proposed growth strategy. A conceptualization of inclusive growth is presented and a distinction is made between absolute and relative pro-poor growth, and the Kuznets curve relative to the inequality / growth nexus is presented. International evidence is mentioned and the case of China is highlighted, in which inequality is not questioned in the growth process. In relation to COVID-19, its probable economic impacts are mentioned, the fiscal responses of the countries of the center and the periphery are contrasted, and the scarce policy space that fits the country is highlighted, as well as the complication of dollarization , in the context of Modern Monetary Theory. Among the results is that i) the pattern of inequality is not important in the short term in the growth of El Salvador; ii) the impacts of COVID-19 will significantly reverse the advances in poverty and inequality; iii) resource requirements are large and worsen an already delicate fiscal position; and iv) given the possibility of discomfort due to the way in which resources are distributed among families, companies and banks for economic restructuring, the preparation of plans developed by experts who enjoy consensus is recommended.