Growth in Honduras is due to remittances and strong export performance. Nevertheless, over 59% remain below the poverty line and 36.2% in extreme poverty. Bank and government work together to reduce vulnerabilities and create opportunities for all.
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Regional growth down to 1.2 percent this year, rebounding to 2.2 percent in 2015Average for the entire region understates growth in many smaller countriesEmployment and quality education for all, key ... Show More +to maintaining social gainsWASHINGTON, October 7, 2014 – During the recent commodity boom, Latin America and the Caribbean proved that growth could be pro-poor and help fuel tremendous social progress. Now as growth slows regionally and beyond, it is critical to consider what will shore up economic activity while ensuring the poor won't stay behind. In its latest semiannual report, Inequality in a Lower Growth Latin America, the World Bank´s Office of the Chief Economist for Latin America and the Caribbean forecasts an average 1.2 percent rate of growth for 2014 with a rebound to 2.2 percent in 2015. This deceleration comes with a difference.“In terms of equity, the simple fact that Latin America today is not the Latin America of the 1980s or 1990s, is already a good news story,” said Augusto de la Torre, World Bank Chief Economist for Latin America and the Caribbean. “For the first time in recent history, the region is no longer following a boom-bust cycle of the type that used to set the economy back for many years, hurting the poor the most.”The report, issued ahead of the IMF-World Bank Group annual meetings, finds a great deal of heterogeneity within the region. Panama leads with an impressive 6.6 percent growth for the year and Bolivia, Colombia, Dominican Republic, Ecuador, Guyana, Nicaragua, Paraguay, and Surinam are expected to grow more than 4 percent, well above the regional average. Meanwhile big economies such as Venezuela and Argentina are going into negative territory, at -2.9 and -1.5 percent respectively, and the regional giant, Brazil, is expected to growth by only 0.5 percent.With this level of growth, countries may find it challenging to keep the social gains from the last decade. During those golden years the region was able to cut extreme poverty by half to 12 percent in 2012, and double the ranks of the middle class to 34 percent of the population in 2012. That year, Gini index of income inequality was 7 points lower than in 2003, largely due to a narrowing of wage gaps in the region.Now in a more stable, albeit slower growth environment, governments in the region will understandably want to focus on maintaining the levels of employment that contributed to those equity gains and thus meet the expectations raised during the boom. Some countries in the region will have at their disposal the types of tools -- such as countercyclical monetary policy with flexible exchange rates as well as ample space to borrow -- that will help them maintain jobs without compromising the longer term priority of boosting productivity in order to grow more.“Other countries, however, with high levels of indebtedness or facing inflation pressures despite the slowdown, may find it more difficult to respond,” said de la Torre. “The temptation for these countries would be to take the path of least resistance, keeping aggregate consumption and government spending high and borrowing to finance the associated fiscal and external deficits. This path might be encouraged by highly liquid international markets seeking higher yields. The short-run gains, however, would carry a high price: lower long-run growth due to a more vulnerable balance of payments or an uncompetitive real exchange rate.”To maintain the path of pro-poor growth of the past decade, productivity oriented reforms need to be complemented by policies that increase the quality and coverage of education in line with growing demand for skilled labor. The report thus concludes that advances in the quality of primary, secondary, and tertiary education that benefit all Latin Americans will be crucial to ensure that the dividends of productivity gains are fairly distributed so that the prosperity is truly shared. Contacts:In Washington: Sergio Jellinek (202)458-2841, email@example.comMarcela Sánchez-Bender (202) 473-5863, firstname.lastname@example.org For more information, please visit: www.worldbank.org/lac Visit us on Facebook: http://www.facebook.com/worldbankBe updated via Twitter: http://www.twitter.com/BancoMundialLAC For our YouTube channel: http://www.youtube.com/worldbank Show Less -
ChallengeMost countries in Central America were hit hardly by the fiscal crisis in 2009, from which some of them have not yet recovered. They are also exposed to commodity prices volatility and natura... Show More +l disasters. These shocks concerned the authorities of these countries due to their economic and social impact, and prompted them to request technical advice from the Bank. In some cases, addressing issues related to the government requests for advice and/or technical notes on these issues require prompt answers, which have proven to be difficult in the past. These demands could not be delivered by traditional Economic and Sector Work or Technical Assistance, since the processing was relatively burdensome. The challenge consisted in finding flexible approaches and ways to lift this constraint in order to enhance the relevance of the dialogue and to improve the responsiveness of the Bank in helping the governments to solve these issues. ApproachIn order to meet these demands, the Bank developed a new approach through a Just-in-time type of product in 2012. This new approach consisted in creating a task aimed at providing technical advice and analytical elements, with a process that avoided the lengthy procedures for an ESW. The task was client driven and prompted by their requests. The process involved systematic consultation and interactions with the clients and other local entities related, including discussion and presentation of the content of the notes. It has helped produce strategic notes that delivered informed and well-targeted recommendations on a range of issues in a timely manner. The topics covered included: public finance management, impact of food prices, and responses to natural disasters faced by individual countries, among others. Just-in-Time products also facilitated addressing regional issues through a process that entailed little operational and administrative burden.ResultsJust-in Time products have allowed for producing technical policy notes on various issues, including: Analysis of Growth in Honduras; Analysis of Budget Execution Weaknesses in Honduras; Efficiency of Public Expenditures and Procurement in Costa Rica; Fiscal Responses to Natural Disasters in Guatemala; Understanding Potential Effects of Food Price Issues in Central America. The notes elaborated with this methodology have generated useful information and key recommendations to solve specific problems, informed policy decision and allowed the client to adopt, in some cases, measures to tackle urgent issues that required prompt actions. That has been the case for the “Analysis of Budget Execution Weaknesses in Honduras”. The note on Budget Execution Control was instrumental in identifying measures to strengthen a budget execution process in Honduras, informed the PER and provided inputs to the Government expenditure management action plan being implemented. In some other cases, implementation of the recommended solutions remains to be seen but the product has been received as a valuable input.Bank Group ContributionThe task was financed by Bank Budget only. Cumulative expenses of USD235,000 dollars were spent in a period of two years. PartnersThe Policy Notes were produced in an environment of close collaboration with each country’s relevant government officials. But the bank team also discussed and consulted with other partners involved in the areas addressed by the Notes as was the case of Honduras for the Expenditure execution note. The task responded to governments’ specific requests, which ensured that the Notes were aligned to country demands and development priorities. Each government also discussed the main results and recommendations of their dialogue with other development partners were included in the Notes. This close collaboration helped obtain accurate information and opened doors for further cooperation.Moving Forward Most of the Notes were delivered to each country. In some cases, they have fed into other key tasks, such as the Note on Budget Execution Control in Honduras which was an important part of the Honduras PER. In general, the next steps consist in sustaining the dialogue in the areas where more in-depth discussions are needed, and/or advancing to the implementation stage of policy recommendation. The Bank is extending the Just-in-Time Policy task for FY15 given the interests expressed by the governments and the results achieved. Beneficiaries Main beneficiary countries include Honduras, Costa Rica, Guatemala, and more generally Central America as a region. The Notes not only have benefited the authorities but also helped to keep informed other relevant entities. For instance, the Note on Growth in Honduras was done in collaboration with the Government and a think tank which regroups several non-governmental organizations. The Task also had positive impact. Not only the note on the Honduras Budget Execution Control note on Honduras has fed into the Honduras PER, but the recommendations are now part of an action plan of the Government to improve expenditure management. Show Less -