The political environment will remain polarised between the opposition left-wing Frente Farabundo Martipara la Liberacion Nacional (FMLN), which will assume office for the first time in June 2009, and the right-wing Alianza Nacionalista Republicana (Arena), which had held power for two decades. The FMLN’s moderate president, Mauricio Funes, will face serious challenges upon assuming office, including the severe economic downturn and escalating crime.The FMLN's lack of a majority in Congress will complicate policy implementation in the next five-year term because governability will be weak. Although the FMLN is the largest single party in the new Congress, the three centre-right and right-wing parties dominate, with 48 of the 84 seats (32 for Arena; the Partido de Conciliacion Nacional (PCN) and the Partido Democrata Cristiano (PDC) control 16 seats), compared with 35 for the FMLN and one for the minority left-wing party, Cambio Democratico (CD). At times, he may be able to persuade the PDC and the PCN to support his initiatives in return for political favours, but Arena will form a robust opposition.Mr Funes has promised to maintain dollarisation, honour foreign debt payments and trade accords, including the Dominican Republic-Central American Free-Trade Agreement (DR-CAFTA) between the US and Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua and the Dominican Republic).Apart from dealing with the slowing economy, the Funes government will attempt to raise spending on social programmes. Given the limited room for fiscal manoeuvre owing to dollarisation, the Economist Intelligence Unit expects that the government will make efforts to raise the tax take and redirect subsidies, helping them to channel additional funding into social spending to meet their campaign promises.GDP growth will contract in 2009 before recovering weakly in 2010 as a result of the global slowdown and, in particular, the US recession. Growth will recover to 2.5-3% in 2011-13. DR-CAFTA will help to underpin growth prospects and will partly offset the threat of Asian competition in the US. After rising for most of 2008, inflation has started to ease sharply. Although it will be low in absolute terms, helped by dollarisation, it will be higher than in the US, implying a steady gradual loss of competitiveness. The need for tight fiscal control will remain a constraint on growth. Despite falling in 2009, remittances from the US will continue to play a vital role in supporting private consumption in El Salvador.Key indicators200820092010201120122013Real GDP growth (%)3.2-1.01.92.32.43.1Consumer price inflation (av; %)7.31.52.52.72.72.2Budget balance (% of GDP)-1.0-1.5-1.3-1.0-1.2-1.1Current-account balance (% of GDP)-7.1-1.5-0.8-0.9-1.5-1.3Exchange rate US$:€(av)1.471.321.391.421.451.47