The World Bank In Honduras

The real GDP of the Honduran economy grew by approximately 3.6 percent in 2023, reflecting a deceleration when compared to the 4 percent recorded in 2022. This reduced growth is partially attributable to the decline in the demand for textiles in the United States. The sustained growth of remittances and credit supported household consumption and investment, partially offsetting the decline in exports.

The deceleration in GDP growth is projected to continue in the near future, with rates of 3.5 percent in 2024 and 3.4 percent in 2025, as slower growth in the United States will delay the recovery of manufacturing exports and slow down the growth rate of remittance inflows. In addition, expected reduced yield on key crops will also hinder exports. GDP growth is expected to strengthen gradually from 2026 onwards, supported by more favorable global conditions and dynamic public and private investment.

In 2022, the inflation rate reached 9.1 percent, the highest since 2008, due to the strong impact of rising global food and fuel commodity prices, while the monetary authorities did not raise the key monetary policy interest rate. However, inflation has declined since February 2023 and stood at 5 percent in August 2024, 0.7 percentage points lower than the previous year and within the central bank’s tolerance range. The decrease was driven by declining international food and fuel prices and supported by  liquidity absorption measures instituted by the central bank.

Honduras has made progress in reducing poverty, although it still ranks as one of the poorest and most unequal countries in Latin America and the Caribbean. Poverty, at a threshold of US$6.85 per capita per day (2017 PPP), is estimated to reach 51.9 percent of the population in 2023, down slightly from 52.4 percent in 2022. However, this percentage is above the levels observed before the COVID-19 pandemic. Moreover, poverty under the US$2.15 threshold remains high, at an estimated 14.1 percent.

In addition, human development outcomes in the country are among the lowest in the region. For example, according to the World Bank's Human Capital Index, a child born in Honduras will be almost half (48 percent) as productive when he or she grows up as he or she could be if fully educated and healthy.

In order to create more opportunities for the Honduran population, especially the most vulnerable, higher economic growth must be fostered, productivity and competitiveness increased, and inclusion promoted by improving access to quality services and jobs. At the same time, institutional reforms are needed in critical areas, such as the sustainability of the energy sector, governance, and the business environment.

Honduras also faces the challenge of strengthening resilience to climate change and improving governance and the quality of institutions, for example through greater transparency and independence of constitutional authorities.

Last Updated: Oct 07, 2024

The World Bank is supporting Honduras’ efforts to reduce poverty in a sustainable manner by using different tools and instruments, such as loans, grants, technical assistance, and knowledge sharing. The Country Partnership Framework (CPF) sets out the strategy for helping Honduras to create a green, inclusive, and resilient economy. The framework is based on the systematic country diagnostic update (PDF, in English), a comprehensive assessment of Honduras’ challenges in terms of growth and poverty reduction. The CPF is organized around the following high-level results:

• Better human development outcomes.
• Inclusive economic development and job creation.
• Greater resilience to natural hazards.

The World Bank’s current portfolio in Honduras includes 12 investment projects and one development policy operation that amount to commitments totaling USD 946 million,  USD 35 million of which are grants from the  Global Agricultural and Food Security Program (GAFSP) and others, like the Global Financing Facility (GFF), Global alliance for vaccines and immunization (Gavi), Global Partnership for Education (GPE), and Japan Social Development Fund (JSDF). The World Bank’s initiatives in the country support the areas of rural competitiveness, social protection, education, water, health, food security, digital development, and disaster risk management.

Some of the World Bank’s operations that have been approved since the pandemic emergence:

• an emergency investment project valued at USD 20 million to respond to the threat posed by COVID-19;
• a stand-by loan for the sum of  USD 119 million to mobilize financial resources to respond to the emergency caused by COVID-19;
• a USD 110 million loan approved in 2022 to consolidate and expand Honduras' regulatory, policy, and financial framework to enable the country to manage disaster and climate-related risks;
• a USD 60 million loan to restore essential health services and strengthen public health preparedness capacities to respond quickly and effectively to emergencies;
• additional financing for the purchase and distribution of vaccines (USD 20 million), to strengthen the social protection system (USD 70 million),  and to support the Rural Competitiveness Project (USD 100 million).

The World Bank also provided USD 39.5 million to support an investment project geared toward improving the quality of pre-school education services, a USD 45 million project to  improve water supply services in participating urban municipalities, a USD 70 million project to improve water service provision and management in the Dry Corridor [Corredor Seco], and a USD 150 million project to support  the country’s reconstruction needs after the passage of hurricanes Eta and Iota.

More recently, the World Bank approved a US$40 million loan to automate birth registration, provide an identification document for children and adolescents, and improve identity verification and authentication services for Hondurans.

Last Updated: Oct 07, 2024

The World Bank is helping Honduras to address the most pressing needs and development challenges in order to improve livelihoods and make an impact on people's lives.

Disaster risk management (DRM): in November 2020, tropical storms Eta and Iota consecutively hit Honduras and other Central American countries, impacting more than 4.5 million Hondurans and resulting in the death of 95 persons and the evacuation of more than 1 million inhabitants. The World Bank has been supporting the Government’s emergency response and post disaster reconstruction efforts.To date, the Project financed the Government's immediate emergency recovery actions, which benefited approximately 300,000 people (60,000 families). In addition, it has been supporting the resilient reconstruction efforts in critical infrastructure. The Project has delivered 37 schools that take into flood risk and incorporate universal access where possible (another 38 schools remain in various phases of execution); five water supply projects are currently being built, as well as one health center, and three bridges have been delivered with two more under execution.

Additionally, the Disaster Risk Management Project (PGRD, in Spanish), supported Honduras to strengthening its capacity for DRM at the municipal and national level and improve its capacity to respond promptly and effectively emergencies. Thanks to this project, 18 municipalities adopted DRM and emergency plans and 38 cities improved their livability, sustainability, and/or management because of the project interventions. Ultimately, the project benefitted 1.3 million people, out of which 52% were female.

Governance: the World Bank helped Honduras to update its poverty measurement methodology to include the latest international standards. This will allow for better targeting of social protection programs and the making of informed policy decisions. The National Statistics Institute has received support in terms of knowledge and capacity building to ensure the successful implementation of the project.

Rural development: the Rural Competitiveness Project (COMRURAL) has contributed significantly to increasing the productivity, competitiveness, and market linkages of 7,200 small rural producers of coffee, dairy, honey, and other products. More than 14,000 families have benefited from the project, of which more than 4,000 are headed by women and more than 5,000 belong to indigenous communities. For every USD 1 invested in COMRURAL, as part of a productive partnership, USD 1.5 have been mobilized from private financial institutions, which is equivalent to approximately USD 12.5 million. This has resulted in the increased financial inclusion and creditworthiness of small farmers. Since 2008, the project has successfully contributed to improving the competitiveness of agricultural value chains, resulting in a 57 percent increase in the gross sales volume of rural producers. COMRURAL-supported producers are responsible for producing almost 30 percent of the total specialty coffee exported by Honduras to the United States, Europe, and Asia.

Additionally, the project Improving the Livelihoods of Miskito indigenous peoples in the La Moskitia works with the local communities to build from their traditional practices of sustainable agriculture and fishing toward a more diversified and resilient local production system in the face of the multiple external shocks, the communities face, including climate change. To date, through this project, it has been possible to improve the livelihoods of more than 1,200 direct beneficiaries; of these, 66 percent are women.

Health: The Honduras COVID-19 Emergency Response Project supported the Government of Honduras to close critical gaps in the COVID-19 response, including the expansion of COVID-19 vaccination coverage, particularly through support to mobile campaigns to reach vulnerable and isolated populations. The project supported the Government in ensuring access to critical inputs, including personal protective equipment distributed to all 20 health regions and 32 hospitals based on prioritization and evolving needs. Over 640 pieces of medical and laboratory equipment were also procured and deployed across all 20 health regions. The project also supported strategies for digitalization to improve quality and utilization of vaccination data for decision-making.

Last Updated: Oct 07, 2024