The World Bank In Honduras

The real GDP of the Honduran economy grew by approximately 3.5 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 3.4 percent in 2024 and 3.3 percent in 2025, as slower growth in the United States will slow the recovery of manufacturing exports and reduce the growth rate of remittance inflows. 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 benchmark interest rate. However, since February 2023, the inflation rate has declined, in keeping with the decline in international food and fuel prices, and in response to liquidity absorption measures instituted by the central bank. In February 2024, inflation stood at 4.5 percent.

Honduras has made progress in reducing poverty, although it still ranks as one of the poorest and most unequal countries in the region. Poverty, at a threshold of US$6.85 per capita per day, is estimated to reach 51.3 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.

In addition, human development outcomes in the country are among the lowest in Latin America and the Caribbean. 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. This is lower than the average for the Latin American and Caribbean region, which is 56 percent.

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: Apr 10, 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 905 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, early childhood education, water and sanitation, health, food security, governance, and disaster risk management.

Among the World Bank’s operations approved since the pandemic is 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; in 2022, the World Bank approved a USD 110 million loan to consolidate and expand Honduras' regulatory, policy, and financial framework to enable the country to manage disaster and climate-related risks, and a USD 60 million loan to restore essential health services and strengthen public health preparedness capacities to respond quickly and effectively to emergencies. Last year, 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.

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.

In 2021, the World Bank approved  USD 20 million in additional financing for the purchase and distribution of vaccines, USD 70 million to strengthen the social protection system, and USD 100 million to support the Rural Competitiveness Project.

Last Updated: Apr 10, 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: 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 responded quickly and worked with the Government to assist in the rehabilitation and resilient reconstruction of the country. As a result, the project was able to finance the costs of the Government's response to immediate emergency needs, benefiting approximately 300,000 people (about 60,000 families). In addition, 18 schools were built under resilient construction standards, benefiting approximately 117,000 people. According to perception surveys, the average citizen satisfaction rate reached 95 percent. Seventeen more schools are under construction and three water and sanitation infrastructure works are underway. To re-establish public services and increase their resilience, contracts are being signed for a series of works in the education, water and sanitation, transport, and health sectors.

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.

Education: through the Education Quality, Governance, and Institutional Strengthening Project, the country expanded school coverage in disadvantaged communities from 36 percent to 50 percent with the opening of nearly 800 pre-school establishments and the provision of equipment for them and training for all their volunteer teachers.

Social protection: with the support of the  Nutrition and Social Protection Project, the Government of  Honduras helped  36,000 at-risk children to stop suffering from food insecurity and improved their social security through a pilot education program for vulnerable youths. The Social Protection Project focused on increasing school attendance and the use of preventive health services by vulnerable families through conditional cash transfers. In total, World Bank-financed projects have helped to provide social protection and assistance to more than 1.13 million people in urban and rural Honduras, that is, 200,000 families living in extreme poverty in rural areas and 40,000 in similar conditions in urban areas.

Water and sanitation: the Water and Sanitation Sector Modernization Project supported the decentralization of water and sanitation services in eight municipalities, with populations ranging from 40,000 to 300,000 inhabitants, through the establishment of autonomous municipal water and sanitation service providers that collect revenues and provide increased coverage. The infrastructure works financed by the project directly benefited 13,167 families who gained access to improved water services and 3,786 families who gained access to improved sanitation facilities. In total, some 650,000 people (108,000 families) benefited indirectly from the improved services.

Infrastructure: the Rural Infrastructure Project, implemented between 2006 and 2016, improved the access, quality, and sustainability of basic infrastructure services, and included the construction of 113 water and sanitation projects and the installation of 4,893 latrines, benefiting 20,751 families in 112 communities. In addition, the project provided funding for 8,550 rural electrification projects (98 percent of which were solar photovoltaic systems) and helped to install 844 kilometers of power lines in 282 communities, benefiting approximately 84 220 people. The project also contributed to the rehabilitation of 667 kilometers of rural roads and provided adequate road maintenance mechanisms for 593 kilometers of roads.

Last Updated: Apr 10, 2024