Overview

  • During recent years, Honduras has registered the second highest economic growth rates in Central America, only behind Panama. The country’s GDP growth reached 4.8 percent in 2017 and 3.7 percent in 2018 and is projected to grow 3.3 percent in 2019, above the average in Central America and well above the average in Latin America and the Caribbean (LAC).

    In addition, Honduras has sustained progress with adjustments allowing the reduction of fiscal deficit and stabilization of public debt.

    Honduras possesses multiple strengths with the potential to propel the country towards faster growth and higher shared prosperity, with its strategic location, a growing industrial base, ongoing efforts to diversify its exports, and a young and growing population.

    However, the country faces high levels of poverty and inequality. While the middle-income country poverty rate (US$5.5 per person per day) dropped from 60.8 percent to 52.6 percent between 2005 and 2017, the extreme poverty rate (US$1.90 per person per day, the international poverty line) is 17.2 percent, the highest rate in LAC after Haiti. Inequality (GINI 50.5 in 2017, among the highest in the region and the world) has also resulted in one of the smallest middle classes in LAC (11 percent in 2015, compared with 35 percent regional average).

    In addition, Honduras struggles from high levels of violence with over 41 homicides per 100,000 inhabitants (2017), among the highest in the world. Moreover, Honduras is vastly exposed to natural adverse events and climate change, especially heavy rainfall and drought that regularly occur and disproportionately affect the poor.

    Moderate and volatile economic growth and high inequality have created the conditions for the emergence of two mutually reinforcing cycles in the country: i) a high crime-low growth cycle; and ii) an emigration/remittance flows-low growth cycle. These continue to affect the economy’s growth potential and the economic opportunities available for Hondurans. These dynamics intertwine to act as push factors for migration. The primary triggers of migration for many people in Honduras continue to be better economic opportunities, crime and violence, and family reintegration.

    A recent agreement with the IMF can help to strengthen the country's macroeconomic framework and support economic and institutional reforms on key issues, such as improving the sustainability of the electricity sector, as well as governance and the business climate, which can contribute to further developing a framework for inclusive growth in Honduras.

    Recent progress in boosting competitiveness in rural economic development and strengthening social protection in Honduras can also improve human capital outcomes and foster more economic opportunities among the country’s most vulnerable.

    Last Updated: Oct 10, 2019

  • On December 15, 2015, the World Bank Group Executive Board approved the Country Partnership Framework (CPF) for 2016-2020, whose pillars are to promote inclusion, strengthen growth conditions, and reduce vulnerabilities in the country.

    The CPF has seven specific objectives:

    · Expand coverage of social programs.

    · Strengthen the renovation of key infrastructure.

    · Increase access to financing.

    · Strengthen the regulatory framework and institutional capacity.

    · Improve rural productivity.

    · Strengthen resilience to natural disasters and climate change. 

    · Build capacities of local governments to prevent crime and violence.

    The World Bank’s current portfolio in Honduras totals US$259 million and includes six investment projects (two pending Congressional approval). World Bank initiatives support sectors in Honduras such as rural competitiveness, social protection, water and food security and disaster risk management.

    Last Updated: Oct 10, 2019

  • Promoting inclusion:

    Through the Education Quality, Good Governance and Institutional Strengthening Project, the Secretary of Education managed to expand school coverage in disadvantaged communities from 36 percent to 50 percent through the opening and equipping of nearly 800 pre-schools, as well as training for all their volunteer teachers.

    With support from the Nutrition and Social Protection Project, the Government of Honduras helped 36,000 at-risk children avoid food insecurity and improved their social security through a pilot education program benefitting vulnerable youth. The Social Protection Project focused on increasing school attendance and use of preventive health services by vulnerable families through conditional cash transfers known as Bono Vida Mejor. The project benefitted more than 1.5 million Hondurans (about 300,000 families) living in extreme poverty.

    The Project to Modernize the Water and Sanitation Sector supported the decentralization of water and sanitation services in eight municipalities, with populations between 40,000 and 300,000, by establishing autonomous municipal water and sanitation service providers that collect revenue and provide increased coverage. Infrastructure works financed by the Project directly benefited 13,167 families with improved water services and 3,786 families with improved sanitation. Overall, the improvements in the utilities indirectly benefitted about 650,000 people (108,000 families).

    Promoting growth:

    The Rural Competitiveness Project (COMRURAL) has contributed to increase productivity, competitiveness, and markets linkages among 7,200 small-scale rural producers of coffee, dairy, honey and other products in Honduras. Each US$1 invested by COMRURAL as part of a productive alliance has leveraged US$1.5 from private financial institutions (around US$12.5 million in total), increasing the financial inclusion and creditworthiness of small-scale farmers. Since 2008, the Project has contributed in making agricultural value chains more competitive and increasing the volume of gross sales of rural producers by 23 percent. Producers supported by COMRURAL produce around 30 percent of all the special coffee exported by Honduras to the United States, Europe and Asia.

    Implemented from 2006 to 2016, the Rural Infrastructure Project improved access, quality and sustainability of basic infrastructure services, including the construction of 113 water and sanitation projects and the installation of 4,893 latrines, benefitting 20,751 families in 112 communities. Additionally, the project financed 8,550 rural electrification projects (of which 98% where solar photovoltaic energy systems) and help habilitate 844 kilometers of power lines in 282 communities, benefitting approximately 84,220 people. The project also contributed to the rehabilitation of 666.93 kilometers of rural roads and provided adequate maintenance mechanisms for 593 kilometers.

    Reducing vulnerabilities:

    The Disaster Risk Management Project is strengthening capacities for comprehensive management of disaster risks at the municipal and national government levels. It is also helping to improve their capacity for rapid and effective emergency response. The project supports the implementation of disaster risk management programs in 81 of the country’s most vulnerable municipalities, benefitting approximately five million people.

    The World Bank has provided technical assistance and grants to support several initiatives in Honduras to strengthen transparency, good governance and improved multi-sector interactions in key development areas, such as the Open Government Partnership (OGP), the Extractive Industries Transparency Initiative (EITI) and the Transparency Initiative for Construction and Public Infrastructure (CoST).

    Last Updated: Oct 10, 2019

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LENDING

Honduras: Commitments by Fiscal Year (in millions of dollars)*

*Amounts include IBRD and IDA commitments


PHOTO GALLERY

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Additional Resources

Country Office Contacts

HONDURAS +504 2264-0200
Edificio Corporativo 777, nivel 9, Col. Lomas del Guijarros Sur, Tegucigalpa, Honduras
cleonjuarez@worldbank.org
USA +1 202 473-1000
1818 H Street NW, Washington, DC 20433
amaso@worldbank.org