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Overview

Annual real GDP expanded by 4 percent in 2022, driven by remittance-fueled household consumption and increased private investment, despite global headwinds and the impact of Hurricane Julia (1.2 percent of 2021 GDP). Honduras’ economic growth is expected to slow to 3.2 percent in 2023.  This is explained by slower growth of exports and especially of remittances, as they normalize following the exceptionally high 2022 inflows, in addition to low private investment and weak budget execution. 

The inflation rate in 2022 rose to 9.1%, the highest since 2008, impacted by high global commodity prices, while monetary authorities did not hike the key policy interest rate. However, since February 2023, the inflation rate has been declining and is currently at 5.7% in August, helped by the decrease in international food inflation.

Honduras remains one of the poorest and most unequal countries in the region. In 2020, as a result of the pandemic and Hurricanes Eta and Iota, the share of the population living under poverty (US$6.85 per person per day at 2017 PPP) reached 57.7 percent, an increase from 49.5 percent in 2019. Since then, the recovery of the economy and the labor market, as well as the inflow of remittances, have contributed to reducing poverty. In 2022, the poverty level is estimated to have decreased to 52.4 percent, although this is still above pre-COVID levels. Extreme poverty (measured under the US$2.15, 2017 PPP line) is estimated at 13.3 percent for the same year, and the Gini Index, which measures inequality, is at 47.5.    

In 2022, Honduras saw a reduction in the fiscal deficit to 0.24 percent of GDP from 3.7 percent in 2021. This was mainly due to lower budget execution (42.1 percent) and an increase in corporate income tax revenues. However, there was a slight increase in public debt from 51.6 percent in 2021 to 52.3 percent of GDP in 2022 as a result of the recognition of previously unaccounted domestic debt.

Human development outcomes in the country are among the lowest in Latin America and the Caribbean. For example, according to the World Bank's Human Capital Indicator, a child born in Honduras will be almost half (48 percent) as productive when he or she grows up than if he or she were guaranteed a complete education and health. This is lower than the average for the Latin America and the Caribbean region, which is 56 percent.

To create more opportunities for the most vulnerable population in Honduras, it is necessary to foster greater economic growth, enhance productivity and competitiveness and promote inclusion by improving access to quality services and jobs. At the same time, it is necessary to implement institutional reforms on critical issues such as the sustainability of the energy sector, governance, and the business environment. 

Similarly, Honduras faces the challenge of strengthening resilience to climate change and improving governance and the quality of institutions, including transparency and the independence of constitutional powers.

Last Updated: Oct 04, 2023

LENDING

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

*Amounts include IBRD and IDA commitments
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Country Office Contacts

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