The real GDP of the Honduran economy grew by approximately 3.6 percent in 2023, reflecting a deceleration when compared to the 4 percent recorded in 2022. This reduced growth is partially attributable to the decline in the demand for textiles in the United States. The sustained growth of remittances Contact online >>
The real GDP of the Honduran economy grew by approximately 3.6 percent in 2023, reflecting a deceleration when compared to the 4 percent recorded in 2022. This reduced growth is partially attributable to the decline in the demand for textiles in the United States. The sustained growth of remittances and credit supported household consumption and investment, partially offsetting the decline in exports.
The deceleration in GDP growth is projected to continue in the near future, with rates of 3.5 percent in 2024 and 3.4 percent in 2025, as slower growth in the United States will delay the recovery of manufacturing exports and slow down the growth rate of remittance inflows. In addition, expected reduced yield on key crops will also hinder exports. GDP growth is expected to strengthen gradually from 2026 onwards, supported by more favorable global conditions and dynamic public and private investment.
In 2022, the inflation rate reached 9.1 percent, the highest since 2008, due to the strong impact of rising global food and fuel commodity prices, while the monetary authorities did not raise the key monetary policy interest rate. However, inflation has declined since February 2023 and stood at 5 percent in August 2024, 0.7 percentage points lower than the previous year and within the central bank''s tolerance range. The decrease was driven by declining international food and fuel prices and supported by liquidity absorption measures instituted by the central bank.
Honduras has made progress in reducing poverty, although it still ranks as one of the poorest and most unequal countries in Latin America and the Caribbean. Poverty, at a threshold of US$6.85 per capita per day (2017 PPP), is estimated to reach 51.9 percent of the population in 2023, down slightly from 52.4 percent in 2022. However, this percentage is above the levels observed before the COVID-19 pandemic. Moreover, poverty under the US$2.15 threshold remains high, at an estimated 14.1 percent.
In addition, human development outcomes in the country are among the lowest in the region. For example, according to the World Bank''s Human Capital Index, a child born in Honduras will be almost half (48 percent) as productive when he or she grows up as he or she could be if fully educated and healthy.
In order to create more opportunities for the Honduran population, especially the most vulnerable, higher economic growth must be fostered, productivity and competitiveness increased, and inclusion promoted by improving access to quality services and jobs. At the same time, institutional reforms are needed in critical areas, such as the sustainability of the energy sector, governance, and the business environment.
Honduras also faces the challenge of strengthening resilience to climate change and improving governance and the quality of institutions, for example through greater transparency and independence of constitutional authorities.
Last Updated:Oct 07, 2024
The World Bank is supporting Honduras'' efforts to reduce poverty in a sustainable manner by using different tools and instruments, such as loans, grants, technical assistance, and knowledge sharing. TheCountry Partnership Framework (CPF)sets out the strategy for helping Honduras to create a green, inclusive, and resilient economy. The framework is based on the systematic country diagnostic update (PDF, in English), a comprehensive assessment of Honduras'' challenges in terms of growth and poverty reduction. The CPF is organized around the following high-level results:
TheWorld Bank''s current portfolio in Hondurasincludes 12 investment projects and one development policy operation that amount to commitments totaling USD 946 million, USD 35 million of which are grants from the Global Agricultural and Food Security Program (GAFSP) and others, like the Global Financing Facility (GFF), Global alliance for vaccines and immunization (Gavi), Global Partnership for Education (GPE), and Japan Social Development Fund (JSDF). The World Bank''s initiatives in the country support the areas of rural competitiveness, social protection, education, water, health, food security, digital development, and disaster risk management.
Some of the World Bank''s operations that have been approved since the pandemic emergence:
The World Bank also provided USD 39.5 million to supportan investment projectgeared toward improving the quality of pre-school education services, a USD 45 million project to improve water supply servicesin participating urban municipalities, a USD 70 million project toimprove water service provision and managementin the Dry Corridor [Corredor Seco], and a USD 150 million project to support thecountry''s reconstruction needsafter the passage of hurricanes Eta and Iota.
More recently, the World Bank approved a US$40 million loan to automate birth registration, provide an identification document for children and adolescents, and improve identity verification and authentication services for Hondurans.
The World Bank is helping Honduras to address the most pressing needs and development challenges in order to improve livelihoods and make an impact on people''s lives.
Additionally, the Disaster Risk Management Project (PGRD, in Spanish), supported Honduras to strengthening its capacity for DRM at the municipal and national level and improve its capacity to respond promptly and effectively emergencies. Thanks to this project, 18 municipalities adopted DRM and emergency plans and 38 cities improved their livability, sustainability, and/or management because of the project interventions. Ultimately, the project benefitted 1.3 million people, out of which 52% were female.
Governance: the World Bank helped Honduras to update its poverty measurement methodology to include the latest international standards. This will allow for better targeting of social protection programs and the making of informed policy decisions. TheNational Statistics Institutehas received support in terms of knowledge and capacity building to ensure the successful implementation of the project.
Additionally, the project Improving the Livelihoods of Miskito indigenous peoples in the La Moskitia works with the local communities to build from their traditional practices of sustainable agriculture and fishing toward a more diversified and resilient local production system in the face of the multiple external shocks, the communities face, including climate change. To date, through this project, it has been possible to improve the livelihoods of more than 1,200 direct beneficiaries; of these, 66 percent are women.
Health: The Honduras COVID-19 Emergency Response Project supported the Government of Honduras to close critical gaps in the COVID-19 response, including the expansion of COVID-19 vaccination coverage, particularly through support to mobile campaigns to reach vulnerable and isolated populations. The project supported the Government in ensuring access to critical inputs, including personal protective equipment distributed to all 20 health regions and 32 hospitals based on prioritization and evolving needs. Over 640 pieces of medical and laboratory equipment were also procured and deployed across all 20 health regions. The project also supported strategies for digitalization to improve quality and utilization of vaccination data for decision-making.
Find out what the Bank Group''s branches are doing in Honduras
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U.S. firms have found corruption and rule of law to be a continued constraint to successful commercial activities in Honduras. The level of corruption rose slightly as Honduras ranked 157th out of 180 countries in Transparency International''s (TI) Corruptions Perceptions Index in 2022, which ranks perceived levels of public sector corruption by experts and businesspeople. At present, Honduras and the UN are negotiating the form, function, and timing of an UN-led International Commission Against Corruption and Impunity (CICIH).
While open to foreign investment with limited restrictions and performance requirements, companies have experienced long waiting periods for regulatory and legislative approvals. Judicial reviews can take years or longer. Some critics argue that corruption and politicization also negatively impact the judicial process in Honduras.
In 2022, the balance of external public debt was approximately 50 percent of the country''s Gross Domestic Product, down from a peak of 52.7 percent in 2020. Despite this relatively low risk of debt distress, the government has chosen to pay down its national debt rather than reprofiling it with new bond issuances. Ironically, reforms to the public procurement system have led to historically low budget execution rates, around 42 percent, leaving the Honduran government with more than $1 billion unspent in its Treasury Single Account at the end of 2022. This lack of government spending represented a missed opportunity to generate economic activity through fiscal stimulus.
Honduras'' business climate is hampered by low education levels and a weak healthcare system. A stronger focus on human capital investments by the new government would improve social outcomes and foster economic opportunities.
An estimated 73 percent of the economically active population is engaged in the informal sector, which competes with formally registered firms for domestic market share.
Although efforts are underway to streamline administrative procedures to start a new business, obtaining some licenses can still take a few months and burdensome regulatory requirements remain a challenge. Companies often cite complex tax policies as a constraint for further expansion.
Citizen security is one of the government''s highest priorities and remains a major concern in Honduras. The government declared a state of exception, suspending normal constitutional rights in late 2022. Although the homicide rate has dropped by more than half since 2011 (from 87 murders per 100,000 inhabitants to 35 in 2022-which is the lowest in the last decade), it remains high by international standards. The cost of crime and violence in Honduras is estimated to equal 6.5 percent of GDP. Violent gangs have threatened citizen security and are known for carrying out extortion rackets against businesses and communities across the country. Theft, pickpocketing, and armed robberies can occur in urban areas.
Honduras is highly vulnerable to extreme meteorological events. Flooding caused by normal moderate to heavy rain causes major infrastructure concerns. Severe economic and critical infrastructure damage occurred after hurricanes Eta/Iota hit Honduras in late 2020. These weather-related phenomena have affected over 4.5 million Hondurans and 68.2 percent of the productive sector, generating serious infrastructure, social, and environmental damages that still constrain growth and compromise food security. An Emergency Response and National Reconstruction and Mitigation plan is currently underway by the government of Honduras, aimed at sustainable and resilient remediation.
According to Honduran Central Bank''s data, the GDP contracted by 9.1 percent in 2020 but rebounded 12.5 percent in 2021 and is expected to have returned to pre-COVID growth levels (approximately 3.7 percent) by the end of 2023. COVID restrictions were lifted in early 2023.
Importers of bulk grains such as corn, soy, wheat, and rice that pass-through Port of Cortes report shortages of what is received versus what is offloaded. Documented losses have reached a cumulative total of $11 million USD over the past three years.
Market participants are currently faced with policy uncertainty, weak rule of law, and digital piracy
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