Honduras is a middle to low income country facing significant challenges, with more than two thirds of the population living in poverty and five out of ten suffering from extreme poverty (2012). In rural areas 6 out of 10 households live in extreme poverty.
Since the 2008-2009 global economic crisis, Honduras has experienced a moderate recovery, propelled by public investments, exports and higher remittances. Economic recovery is reflected in GDP growth of 3.7% in 2010, 3.7% in 2011 and 3.3% in 2012. Nevertheless in 2013 this figure decreased to 2.5%, and the economy is expected to grow a 2.8% in 2014. Moreover, inclusive growth continues to be hampered by inequality.
Another challenge is the level of crime and violence in Honduras, as it is the country with the highest homicide rate in the world (79 per 100,000 inhabitants, according to the Observatorio de la Violencia of the Universidad Nacional Autónoma de Honduras). It is estimated that the annual costs of violence account for about 10% of the country's GDP (nearly US $ 900 million). Crime and violence have also eroded citizens’ confidence in the rule of law. In Honduras, victims of crime are 6.5% more likely to take justice into their own hands when compared to non-crime victims.
The country is also vulnerable to external shocks. An example is the agricultural sector, which has lost about a third of its purchasing power in the last two decades, largely due to a decrease in the prices of the exported crops, notably bananas and coffee. Honduras is also susceptible to adverse natural events such as hurricanes and droughts. Measures to mitigate the impact of these shocks are focused on strengthening the adaptation capacity of households, extend risk management mechanisms based on the market and develop effective social safety nets.
World Bank studies have highlighted the importance of improving the quality of education. It will also be necessary to enhance rural productivity and diversify sources of rural income, since most of the country’s poor live in rural areas and depend on agriculture for their livelihoods.