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Honduras received an additional USD 160 mln from the IMF after completing its 3rd review under the EFF/ECF, bringing total disbursements to USD 485 mln. All December targets were met; key reforms include budget execution tools, FX diagnostics, and investment tracking. The IMF sees 3.5% growth in 2025 and praised energy sector reforms and macro stability.
Honduras posted a Q1 2025 trade deficit of USD 1.46 bln, 19.5% lower YoY, as coffee exports surged due to high global prices. Imports grew modestly to USD 4.7 bln.
Honduras faces a USD 300 mln (0.8% of GDP) lawsuit from EMCO Group for alleged sabotage of Palmerola Airport operations. EMCO claims the government violated DR-CAFTA and CAFTA by coercing the company to exit the concession or accept bribes.
Honduras’ economic activity rose 6% YoY in March. Separately, China agreed to expedite a financing review for the USD 525 mln Honduran Patuca II A hydro project, expected to support electricity, irrigation, and flood control.
Last week, IMF staff and Honduras reached a staff-level agreement on the third review of the EFF/ECF programs. Board approval, expected in June, would release USD 155 mln. The IMF said the economy remains resilient and praised fiscal discipline ahead of elections. Honduras’ economic activity rose 2.2% YoY in February, down from 4.3% in January, per the central bank.
Mexican President Claudia Sheinbaum and Brazilian President Luiz Inácio Lula da Silva agreed to strengthen trade ties between their nations as a counter to US President Trump’s shifting positions on global tariffs. Their meeting on the sidelines of a regional summit in Honduras focused on strategizing responses to Trump’s tariffs and escalating deportations. Frustrations over Trump’s deportation tactics and legal and human rights criticisms add to the economic turmoil in the region.
Honduras’ economic activity grew by 4.2% YoY in January, up from the revised 3.8% in December. International reserves also rose to USD 8.304 bln in February, an increase of USD 341.9 mln compared to a decline of USD 86.7 mln in January.
Honduras’ CPI increased by 1.15% in February, mainly driven by a rise in school costs and transportation prices. Still, prices have been moderated by the subsidies for regular gasoline and diesel for five consecutive weeks. The annual inflation stood at 4.75%, remaining within the tolerance range established by the monetary authority (4.00% ± 1.0 pp). The fuel and electricity subsidy measures have reduced interannual inflation by approximately 0.47 pp (5.22% YoY inflation without subsidies).
Latin American and Caribbean countries are expected to receive USD 160.9 bln in remittances in 2024, representing a 5% growth. Countries like Honduras, Nicaragua, and El Salvador are highly dependent on these transfers, with remittances accounting for significant portions of their GDP. However, many are concerned that US migration policies may hinder these crucial financial flows.
Honduras’ inflation rose 4.27% YoY in January, up from 3.88% in December. Elsewhere, President Xiomara Castro warned that Honduras could expel the US military if President Trump pursued aggressive deportations. On Friday, the US began airlifting deportees from its southern border.
Honduras warned that US immigration policies could push it closer to China, with officials suggesting the country may increasingly turn to China for support, despite traditional ties with the US.
The IMF approved the first and second reviews of Honduras’ financial arrangements, praising the economy’s resilience despite external and climate shocks. However, some end-June performance criteria were unmet, including issues with net international reserves and domestic arrears. Waivers were granted based on corrective actions taken by the government.
Honduras’ consumer prices rose by 0.1% MoM in November, marking the third consecutive mild increase. The 3-month average was 0.04%, down from 0.40% in January-August. Annual inflation declined to 3.9%, slightly below the target range of 4%±1%. A drop in food prices (-0.1% MoM) and lower transportation prices (-0.1% MoM) contributed to the inflation deceleration.
Honduras returned to global debt markets after a four-year absence, raising USD 700 mln through the sale of sustainable bonds maturing in 2034 at a yield of 8.625%, down from initial pricing of 9.125%. The proceeds will be used for green and social investments under the country’s sustainable bond framework. The nation last sold dollar bonds in 2020, raising USD 600 mln in 10-year notes.
Honduras’ economic activity index grew by 3.2% YoY in September, signaling moderated growth in Q3 2024 compared to stronger performance in 1H24. Manufacturing was a drag, contracting 4.7% YoY in September and ending Q3 with a 2.1% decline. That marks the sector’s second consecutive year of contraction, influenced by weak demand from the U.S. manufacturing sector, though financial services continued to drive growth.
Honduras has reported its lowest homicide rate in a decade, with general and gender-based homicides decreasing. The rate is now 26.7 per 100,000 inhabitants, a 15.2-point drop since 2022. Security Minister Sanchez credits the decline to President Castro’s security policies, including a partial state of emergency and the anti-crime plan.
Honduras’ consumer prices declined by 0.1% MoM in September, the first drop in 4.4 years, led by a 1% fall in food and non-alcoholic beverage prices. Annual inflation decreased for the third month to 4.1%, though core inflation remains above target at 5.2%. Persistent inflation pressures influenced recent monetary policy moves.
Honduras’ Central Bank Governor Rebeca Santos indicated that the 5.75% monetary policy rate would likely hold through year-end, with the bank closely monitoring macroeconomic shifts post-rate change. Finance Secretary Duarte announced potential IMF resources of up to USD 239 million pending December approval, opening further access to USD 300 million from multilateral lenders, including the World Bank, IDB, Latin American Development Bank, and OPEC.
Honduras’ central bank raised its monetary policy rate by 175 bps to 5.75%, effective October 28, marking the second sharp hike in under three months following a previous 100 bps increase in August. The rate adjustments aim to control inflation and strengthen Honduras’s external position amid reduced export revenues and slower remittance growth. The bank noted that inflation remains within the 4% ±1% target range for 2024 but acknowledged persistent inflation risks from both external and domestic factors.
Immigration is a key issue in the November US presidential election. Bloomberg Economics predicts that closing the US border could significantly reduce remittance flows, particularly impacting Central America and the Caribbean. Assuming 2.8 mln new unauthorized immigrants by 2028, annual remittances could rise from USD 70 bln this year to USD 91 bln by 2028. Countries like Guatemala and Honduras rely heavily on US remittances, with the latter seeing the highest inflows relative to its economy.
Honduras’ international reserves fell by USD 190 mln to USD 6.767 bln in September. The decline follows a USD 23.8 mln rise in August. Meanwhile, the country’s economic activity rose 2.9% YoY in August, slowing from a revised 3.3% increase in July, according to data from the Central Bank of Honduras.
The IMF and Honduran authorities reached a staff-level agreement on policies and reforms to complete the first and second reviews of Honduras’ IMF-supported program. Despite global challenges and the impact of El Nino, the Honduran economy remains resilient, with growth projected at 4% in 2024, while inflation has stabilized between 4.5% and 5%. However, international reserves have declined due to agricultural export disruptions, increased energy imports, and lower-than-expected financing support.
According to Fitch Ratings, several frontier markets saw a significant economic recovery in Q2 2024, with high GDP growth rates driven by export gains. Countries like Azerbaijan, Costa Rica, Georgia, Ghana, Honduras, and Senegal reported their strongest annual GDP growth rates in recent quarters. However, some countries, including Mongolia, Namibia, and Zambia, experienced slower growth rates compared to previous quarters, with Zambia’s growth at 1.2% YoY, the weakest since the pandemic-related contraction in 2020.
Honduras’ consumer prices increased by only 0.1% MoM in September, well below the monthly average of 0.4% for January-August 2024. This slowdown brought annual inflation down to 4.5%, from 5.0% in August, nearing the national target of 4.0% ± 1.0%.
S&P affirmed Honduras’ credit rating at B- but revised its outlook to negative from stable. The negative outlook reflects concerns about the country’s exchange rate and monetary policies, which might weaken its external financial profile, dampen investor confidence, and hinder economic growth prospects.
Honduras experienced a 3.4% YoY growth in economic activity in July, improving from a revised 1.9% in June. The nation’s international reserves increased to USD 6.95 bln in August, up from USD 6.932 bln in July.
Honduras announced plans to terminate its century-old extradition treaty with the US following controversial remarks by the US ambassador. This treaty was notably used to extradite a former president. Although Honduras and the US have long been allies, with Honduras hosting US troops and cooperating on drug trafficking and immigration issues, recent actions, including Honduras severing formal ties with Taiwan to establish relations with China, have strained relations.
Honduras finalized four loan agreements with the CAF totaling USD 350 mln, The loans aim to enhance infrastructure, advance gender equality, and aid coffee growers and the broader agricultural sector. The progressive disbursement is set to bolster Honduras’ external liquidity, which saw international reserves drop to USD 6.8 bln as of August 15, reflecting a decrease of USD 0.8 bln this year.
Honduras’ monthly economic activity index grew by 2.0% YoY in June, slowing from a 4.0% expansion in the previous month, primarily due to an 11.3% contraction in the manufacturing sector and a slowdown in construction activity growth to 2.0% YoY, compared to 12.8% in the first five months of the year.
Honduras’ remittances rebounded strongly in July with a 12.2% increase YoY, reaching USD 893 mln. This recovery helped lift the January-July total to USD 5.5 bln, a 4.1% growth rate for the year. The trade deficit worsened by 16.1% YoY to USD 3.9 bln through June, with a continued decline in exports and moderate growth in imports.
