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Honduras - Debt Management Performance Assessment (DeMPA) (English)

Relative macroeconomic stability favored the rollout of a robust reform agenda in recent years. The real GDP growth averaged 3.1 percent over the past decade, aided by remittance-fueled private consumption. Prudent macroeconomic management anchored in the Fiscal Responsibility Law (LRF) implemented in 2016 supported prudent fiscal policies, a crawling peg exchange rate with ample foreign reserves, and a solid financial sector supported macroeconomic stability in the run-up to the COVID-19 crisis. The government advanced reforms to strengthen the macroeconomic framework, business environment, and monitoring and mitigation of fiscal risks, including those related to the state electricity company (ENEE), the key source of fiscal vulnerability. However, country’s exposure to external shocks, natural hazards, combined with high crime rates and a weak institutional and business environment, undermined its competitiveness and ability to boost growth and incomes. in 2019, almost half the population (4.8 million people) lived on less than US5.50 dollars per day, making Honduras one of the poorest countries in the Latin America and Caribbean region. The external position remains relatively strong, supported by remittances and higher external financing, mainly from multilateral organizations, received in response to the pandemic. Foreign reserves stood at US8.9 bn dollars (37 percent of 2020 GDP) at the end-August 2021, supporting exchange rate stability. After registering a historical surplus of 2.9 percent of GDP in 2020, the current account is expected to reverse to a deficit in 2021 on the back of recovering imports. A wider current account deficit associated with higher import values is expected to be financed primarily by FDI inflows in the medium term. As the economy begins to gain momentum, an increase in FDI is expected, especially in critical economic sectors such as maquila. As the authorities advance with the much-needed reform agenda for the electricity sector, greater investments in generation and transmission are also expected.

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Citation

Proite,Andre Puccini Secunho,Leandro Currie Wiesner,Elizabeth Barbara Somarriba Tablada,Leonardo Alejandro

Honduras - Debt Management Performance Assessment (DeMPA) (English). Washington, D.C. : World Bank Group. http://documents.worldbank.org/curated/en/099025003222235032/P17401502641ce02d0954d0ac7ddbc6433d