Does she sleep on that side? It looks like a heat rash to me, maybe the fabric isn’t breathable enough.

Looks like baby acne. My son had it bad from 3 weeks until about 5 weeks I think. They says it's all of our hormones leaving their body and them getting nutrients on their own now. Hope hers clears up soon. I wouldn't put anything on it either. Just let it breath unless it looks like it is now bothering her.