El Salvador is back in the headlines as a regional role model, not for President Nayib Bukele’s security, but for the economy. In particular, growth expectations have risen. The World Bank, for example, has revised its 2026 real growth projection from 2.2 percent to 2.5 percent. In December, the IMF hinted at a strong 4 percent for 2025.
The relative boom appears to have encouraged fiscal exuberance. In his second term, beginning in June 2024, Bukele has leaned into paternalistic measures. These include transfers and additional payments for both public- and private-sector workers. The policies buy applause, but they call into question how much reported growth has been propped up by state injections and whether it can last.
Bukele’s popularity remains exceptionally high. In December 2025, pollster CID Gallup reported 90 percent of Salvadorans approve of his administration. The tradeoff generated by populism is the country’s debt burden, already about 89 percent of GDP. From December 2024 to December 2025, public debt increased by over $1.7 billion. Moreover, debt servicing pressure is approaching fast. About 25 percent falls due within five years, and another 22 percent within a decade.
Investment, Tourism Euphoria
With official figures reporting a record-low homicide rate of 1.3 per 100,000 inhabitants in 2025, Bukele is promoting El Salvador as an investment and tourism hub. However, he knows public safety alone does not bring capital. Investors want clear rules, guarantees, and stronger purchasing power. That is why his administration has pursued legal incentives.
The government has created an investment agency that offers tailored support based on sector and capital size, with the state guiding projects from entry to execution. Still, foreign direct investment (FDI) has not shown a sustained improvement.
Central bank figures report net FDI rising from about $171 million in 2022 to roughly $639 million in 2024, reinforcing the narrative of a country “turning the corner.” By the third quarter of 2025, however, net FDI stood at $198.3 million, far below the $399.5 million recorded at the same point in 2024.
Investors price political and judicial risk, policy reversals, and fiscal credibility. As long as investment hinges on executive discretion, investors will think twice before placing significant capital in El Salvador.
Bukele’s efforts to promote tourism have been more successful. Official figures report 4.1 million international visitors in 2025, a 5.1 percent increase versus 2024. As long as the government promotes private initiatives guaranteeing legal certainty, this industry will lead to sustained growth and higher incomes in the country.
Liquidity with a Price Tag
Inside El Salvador, the government has added its own Keynesian injections. In January 2025, Bukele announced a one-off measure to cover water and electricity bills for 95 percent of households.
Then came a more structural imposition on employers: the Quincena 25 Law (Fortnight Law). The legislation creates an annual payment equivalent to half of a worker’s monthly salary—for those earning up to $1,500—paid between January 15 and 25. In 2026, the payment is voluntary for private employers; starting in 2027, it becomes obligatory for both the public and private sectors.
El Salvador already commits significant resources to subsidies: cooking gas, electricity, water, and public transport. A report from the Central American Integration System cited El Salvador as the country allocating the most to subsidies in 2025—about $128 million in the first half of the year—and flagged concerns about efficiency.
The risk is that these policies rarely remain temporary. Once benefits become associated with the leader and households plan around them, rolling them back becomes politically costly. Bukele’s security gains have opened a historic window for the Salvadoran economy. The Bukele model’s longevity now rests on legal and fiscal stability, transparent procurement, and growth that does not stem from the state being a dispenser of transfers.
