Subchapters:
- Basic data
- Public finances and the state budget
- Banking system
- Tax System
Basic data
The economy of Honduras achieved a significant strengthening in 2021, growing by 12%, mainly due to the recovery of the economy after the big slump in 2020, a significant increase in the volume of remittances, but also an increase in the inflow of foreign investments. In 2022, however, growth should already slow down and reach 2.7%. The country continues to recover from the hurricanes, and part of the investment goes into reconstruction after this disaster. Higher inflation growth is also expected, which should further slow down GDP growth. Check ebizdir for economical facts of Honduras.
Honduras benefits from a relatively prudent fiscal and monetary policy, with a debt ratio of less than 60%, but Congress approved a $2 billion loan in February 2022 to prevent potential financial and fiscal problems. Unemployment in the country is around 8%.
The economy of Honduras is based primarily on agriculture, which also accounts for 12% of GDP, and mining. The country primarily exports coffee, bananas, shrimp and precious metals. On the contrary, it imports products mainly petroleum oils, chemical products, plastic products, industrial equipment or medical supplies and equipment.
| Pointer | 2019 | 2020 | 2021 | 2022 | 2023 |
| GDP growth (%) | 2.7 | -9 | 12.5 | 2.7 | 3.1 |
| GDP/population (USD/PPP) | 5,980.00 | 5,420.70 | 6,170.00 | 6,590.00 | 6,880.0 |
| Inflation (%) | 4.4 | 3.5 | 4.5 | 5 | 3.9 |
| Unemployment (%) | 6.6 | 8.5 | 8 | 7.6 | 7.4 |
| Export of goods (billion USD) | 4.2 | 4.2 | 5 | 5.5 | 5.7 |
| Import of goods (billion USD) | 10.2 | 8.6 | 13.3 | 13.4 | 13.6 |
| Trade Balance (Billion USD) | -3.1 | -2.6 | -5.6 | -5.2 | -5.1 |
| Industrial production (% change) | ON | ON | ON | ON | ON |
| Population (millions) | 9.8 | 9.9 | 10.1 | 10.2 | 10.4 |
| Competitiveness | ON | ON | ON | ON | ON |
| OECD export risk | 05.VII | 05.VII | 05.VII | ON | ON |
Source: EIU, OECD, IMD
Public finance and state budget
| Public finance | 2021 |
| State budget balance (% of GDP) | -5 |
| Public debt (% of GDP) | 57.1 |
| Current account balance (billion USD) | -0.7 |
| Taxes | 2022 |
| AFTER | 25% |
| F.O | 15-25% |
| VAT | 15-18% |
The EIU projects that the focus on fiscal consolidation in Honduras will lead to a gradual reduction in the fiscal deficit from 5% of GDP in 2021 to 2.1% in 2026. However, in 2022 it is expected to only a slight reduction to 4.5% of GDP.
President Castro’s fiscal program includes increased public spending on education, health, electricity subsidies, social security, and investment in roads, highways, mines, energy, and telecommunications. A unified tax reform is envisaged, which will focus on limiting tax exemptions, combating tax evasion, eliminating loopholes in the tax code and improving tax administration.
With no tax increase on the table, revenue growth from 2023 will be driven primarily by sustained GDP expansion. It is expected that the public debt-to-GDP ratio could gradually decrease, down to just under 50% in 2026.
Banking system
The banking system in Honduras is two-tiered. In addition to the central bank Banco Central de Honduras, the state banks Banco Nacional de Desarrollo Agrícola and Banco Hondureño para la Producción y la Vivienda and 15 other commercial banks operate here, as well as stock exchanges, exchange offices, insurance companies, pension funds and small financial institutions.
Banking operations are governed by the Central Bank Reform Act approved in 2004. The Banking Commission Reform Act and the Deposit Insurance Fund Reform Act (FOSEDE in Spanish) transfer responsibility for the restitution of troubled banks to the Banking Commission. The primary objective of the law was to bring Honduran regulation of the financial sector into line with internationally recognized basic principles for effective banking supervision. The law also strengthened the previously ineffective national credit bureau and imposed new restrictions on bank ownership and management.
The most important commercial banks:
- Banco Ficohsa
- Banco Atlántida
- BAC Credomatic
- Banco de Occidente
- Banpaís
All commercial banks provide standard banking services.
Tax system
The Honduran tax system is relatively transparent and stable, however, tax reform is expected in the coming years, which will focus on limiting tax exemptions, fighting tax evasion, eliminating loopholes in the tax code and improving tax administration. However, there should be no tax increase.
FO and PO income
tax In Honduras, corporate income tax is 25%, for natural persons there are three tax rates depending on the amount of income – 15%, 20% and 25%. The monthly income of natural persons below 14,343 HNL is exempt from tax.
Value Added
Tax A value added tax (Impuesto de Ventas) of 15% is levied on almost all goods, although an 18% tax is applied to selected items such as alcohol and carbonated drinks.
