2017 Index of Economic Freedom

Honduras

overall score58.8
world rank100
Rule of Law

Property Rights45.0

Government Integrity32.2

Judicial Effectiveness38.2

Government Size

Government Spending74.7

Tax Burden83.3

Fiscal Health64.1

Regulatory Efficiency

Business Freedom56.9

Labor Freedom31.2

Monetary Freedom77.3

Open Markets

Trade Freedom78.4

Investment Freedom65.0

Financial Freedom60.0

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Quick Facts
  • Population:
    • 8.4 million
  • GDP (PPP):
    • $41.1 billion
    • 3.6% growth
    • 3.5% 5-year compound annual growth
    • $4,869 per capita
  • Unemployment:
    • 3.9%
  • Inflation (CPI):
    • 3.2%
  • FDI Inflow:
    • $1.2 billion
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Broader implementation of deeper institutional reforms remains critical to spurring dynamic economic growth throughout the Honduran economy. Despite the implementation of policies that aim to sustain market openness and facilitate engagement in global commerce, the overall entrepreneurial environment continues to be hurt by weak protection of property rights and political instability.

Management of public expenditures has improved in recent years. In April 2016, Congress approved a fiscal responsibility law intended to institutionalize the ongoing fiscal consolidation. Systemic corruption continues to erode the rule of law and trust in the government. Reducing severe crime and violence remains a priority.

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Background

Honduras, the second-poorest country in Central America, has one of the highest homicide rates in the world as street gangs and transnational organized criminal networks prey on communities, often in collusion with authorities. In 2015, the country’s Supreme Court struck down a controversial term limit and cleared the way for President Juan Orlando Hernández to seek a second term in 2017. Hernández has promoted foreign investment and has encouraged leaders of El Salvador and Guatemala to join him in making Central America more competitive. Continuing high levels of violence, extensive narco-related money laundering, and reports of government corruption reaching the highest levels have undermined the country’s international image.

Rule of LawView Methodology

Property Rights 45.0 Create a Graph using this measurement

Government Integrity 32.2 Create a Graph using this measurement

Judicial Effectiveness 38.2 Create a Graph using this measurement

Approximately 80 percent of the privately held land in Honduras is either untitled or improperly titled. Resolution of title disputes in court often takes years, partly because of the judicial system’s weakness. Rampant corruption and weak state institutions make it virtually impossible to combat threats posed by violent transnational gangs and organized criminal groups. Honduras has one of the world’s highest murder rates.

Government SizeView Methodology

The top individual income and corporate tax rates are 25 percent (27.5 percent for corporations with an added social contribution tax). The overall tax burden equals 20.6 percent of total domestic income. Government spending has amounted to 29.1 percent of total output (GDP) over the past three years, and budget deficits have averaged 4.4 percent of GDP. Public debt is equivalent to 47.4 percent of GDP.

Regulatory EfficiencyView Methodology

The inefficient regulatory environment does not encourage dynamic entrepreneurship, and the cost of forming a business is burdensome. Labor regulations are outmoded, and a large proportion of the labor force is dependent on the informal sector. The government is continuing to overhaul the struggling state-owned ENEE electricity utility but maintains price controls for basic food items along with water, telecommunications, and port services.

Open MarketsView Methodology

Trade is extremely important to Honduras’s economy; the value of exports and imports taken together equals 109 percent of GDP. The average applied tariff rate is 5.8 percent. In general, the government does not screen or discriminate against foreign investment. The financial sector has regained stability following the liquidation of Banco Continental in late 2015. Capital markets are not fully developed.

Country's Score Over Time

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Regional Ranking

rank country overall change
1Chile76.5-1.2
2Colombia69.7-1.1
3Uruguay 69.70.9
4Jamaica 69.52.0
5Peru68.91.5
6Panama 66.31.5
7Saint Vincent and the Grenadines65.2-3.6
8Saint Lucia65-5.0
9Costa Rica 65-2.4
10El Salvador 64.1-1.0
11Dominica63.7-3.3
12Guatemala 631.2
13Dominican Republic62.91.9
14Paraguay 62.40.9
15Trinidad and Tobago61.2-1.7
16The Bahamas61.1-9.8
17Nicaragua 59.20.6
18Honduras 58.81.1
19Belize58.61.2
20Guyana58.53.1
21Barbados54.5-13.8
22Brazil52.9-3.6
23Argentina50.46.6
24Haiti49.6-1.7
25Ecuador49.30.7
26Suriname48-5.8
27Bolivia47.70.3
28Cuba33.94.1
29Venezuela 27-6.7
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