Business in Honduras: economic snapshot August 2018 | finder.com

ECONOMIC SNAPSHOT
HONDURAS

Internal perspective

While experts predict a favorable economic outlook for Honduras, the country faces major challenges that include extreme poverty and a vulnerability to external shocks and natural disasters, like hurricanes and drought. To mitigate these challenges, targeted social programs are working to potentially lower poverty rates and increase the quality of the country’s education system.

Population

8.4 million in 2015

Internet users

17.8% in 2013

Gross domestic product (GDP)

  • $20.42 billion in 2015

Top 5 Imports

Top 5 exports

Languages

Top 3 Trading Partners

Top franchises

GDP growth rate (est.)

  • 3.6% in 2015
  • 3.1% in 2014
  • 2.8% in 2013

Trends and outlooks

  • Moderate recovery from 2008 global economic crisis driven by public investments, exports and higher US remittances.
  • Economy expected to grow by 3.6 percent supported by agriculture, construction and favorable monetary policy.

Economic challenges

  • Highest level of economic inequality in Latin America
  • One of the world’s highest homicide rates
  • Lost revenue in agricultural sector due to the low export prices of bananas and coffee

Introduction

According to 2017 International Monetary Fund data, Honduras ranks 109th among country economies based on nominal gross domestic product (GDP), which evaluates market prices, and 108th among countries based on purchasing power parity (PPP), which compares the prices of like consumer goods among countries.

With a population of around 9 million, Honduras ranks 128th in the world based on nominal GDP per capita and 134th based on GDP by PPP per capita. These measures divide nominal GDP and GDP by PPP by the country’s population.

What should I know about nominal GDP and PPP?

Among the multiple ways that economists measure a country’s economic strength, nominal GDP and PPP are two of the most common.

Nominal GDP is based on official government estimates and depends on exchange rates between two countries, typically using the US dollar for one of the denominations. It’s useful for measuring financial flows between countries. But because it doesn’t consider differences in cost of living, it can distort per capita income estimates.

PPP, on the other hand, considers the relative cost of local goods, services and inflation rates — all factors considered to reflect a country’s domestic market. Because PPP compares the costs of a common “basket of goods” — some 3,000 consumer goods that include food, fuel and insurance — it’s considered a more ideal way to project per capita income projections and gauge poverty thresholds.

Economic indicators

The official currency of Honduras is the Honduran lempira (HNL). This currency has recently fluctuated between 23.5 and 23.6 HNL against the US dollar.

Honduras is an agricultural economy primarily, although agriculture accounted for only 14% of GDP by 2013. Honduras exports coffees and bananas, the government and foreign corporations owning most of the land bananas are planted in. Other crops include sugar, basic grains and “nontraditional” fruits and vegetables, like cacao and cashews. Although in the past, poor soil conditions and farming practices have resulted in low agricultural yields, agricultural production has increased.

Another sector that hasn’t expanded beyond Honduras is the livestock industry. In the 1980s, the country attempted to export meat, livestock and dairy to other countries, but yields were lower than those in neighboring countries, eventually hurting the industry as subsidized foreign imports flooded the domestic market.

Industry accounted for only 15% of GDP in 2010. Major industries include textiles and food processing.

Remittances from Hondurans abroad to families back home reached more than $2 billion in 2007, accounting for more than 28% of GDP.

As of 2016, an estimated 7.4% of the population was unemployed.

Major contributors to the economy

Honduras is a member of the World Trade Organization and the Dominican Republic-Free Trade Agreement. Its top trading partners include the US, El Salvador, Mexico, Guatemala and Mexico.

The country’s top exports include:

  • Coffee and spices
  • Fish
  • Bananas, melons, pineapples and nuts
  • Electronic equipment
  • Animal and vegetable fats and oils

Its major imports include:

  • Oil
  • Electronic equipment
  • Machines, engines and pumps
  • Vehicles
  • Pharmaceuticals

Economic prospects

Honduras is one of the poorest countries in Latin America, with more than 66% of its population living below the poverty line and 1 of every 5 people in rural areas living in extreme poverty. The country also has high income inequality and rampant crime and violence.

The government has been successful in curbing violent crime recently, but the country’s homicide rate remains one of the world’s highest.

Due to its reliance on such export crops as coffee and bananas, the Honduran economy suffers whenever prices decline on the global market. To make matters worse, natural disasters bring about massive economic displacement.

Although public investments, exports and remittances led to moderate growth in 2016 and 2017, the government must focus on improving education, reducing poverty and encouraging economic diversification to sustain economic growth.

Sources:
  • https://en.wikipedia.org/wiki/List_of_countries_by_GDP_
    (nominal).
  • https://en.wikipedia.org/wiki/List_of_countries_by_GDP_
    (PPP)
  • Wikipedia’s List of Countries by GDP (PPP) per capita
  • https://en.wikipedia.org/wiki/List_of_countries_by_GDP
    _nominal_per_capita
  • https://en.wikipedia.org/wiki/List_of_countries_by_GDP
    _PPP_per_capita
  • https://en.wikipedia.org/wiki/Economy_of_Honduras
  • http://www.worldbank.org/en/country/Honduras/overview

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