2016 Index of Economic Freedom

Honduras

overall score57.7
world rank113
Rule of Law

Property Rights30.0

Freedom From Corruption29.0

Limited Government

Government Spending72.0

Fiscal Freedom84.2

Regulatory Efficiency

Business Freedom58.0

Labor Freedom31.0

Monetary Freedom74.8

Open Markets

Trade Freedom78.4

Investment Freedom60.0

Financial Freedom60.0

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Quick Facts
  • Population:
    • 8.3 million
  • GDP (PPP):
    • $39.1 billion
    • 3.1% growth
    • 3.5% 5-year compound annual growth
    • $4,729 per capita
  • Unemployment:
    • 3.9%
  • Inflation (CPI):
    • 6.1%
  • FDI Inflow:
    • $1.1 billion
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Honduras has pursued policies that sustain market openness and facilitate engagement in global commerce. The Central America–Dominican Republic–United States Free Trade Agreement and other free trade agreements have led to modernization and liberalization of trade and investment. Reducing severe crime and violence continues to be a priority.

Economic Freedom Snapshot

  • 2016 Economic Freedom Score: 57.7 (up 0.3 point)
  • Economic Freedom Status: Mostly Unfree
  • Global Ranking: 113th
  • Regional Ranking: 19th in the South and Central America/Caribbean Region
  • Notable Successes: Trade Freedom and Monetary Freedom
  • Concerns: Corruption, Property Rights, and Labor Freedom
  • Overall Score Change Since 2012: –1.1

Broader implementation of deeper institutional reforms remains critical to spurring more dynamic economic growth across the country. Systemic public-sector corruption continues to erode the rule of law and trust in the government. The judicial system is weak and vulnerable to political influence.

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Background

The Honduran supreme court’s April 2015 elimination of the single-term limit for the presidency permits President Juan Orlando Hernández to seek a second term in 2017. Honduras still has the world’s highest per capita homicide rate. The victims are mostly young men. Corruption and criminal behavior in police forces is acute. The economy depends heavily on U.S. trade and remittances. Hernández has promoted foreign investment and encouraged leaders of El Salvador and Nicaragua to join him in making Central America more competitive, but Honduras remains one of Latin America’s poorest countries, with more than two-thirds of the population living below the poverty line. The country signed a three-year IMF standby arrangement in December 2014.

Rule of LawView Methodology

Property Rights 30.0 Create a Graph using this measurement

Freedom From Corruption 29.0 Create a Graph using this measurement

Rampant corruption and weak state institutions make it virtually impossible to combat violent transnational gangs and organized criminal groups. Honduras has one of the world’s highest murder rates. The court system is weak and inefficient, and resolution of disputed cases can take years. Laws and practices regarding real estate differ substantially from those in more developed countries, and fraudulent deeds and titles are common.

Limited GovernmentView Methodology

The top individual income and corporate tax rates are 25 percent (27.5 percent for corporations with an added social contribution tax). Other taxes include a capital gains tax and a general sales tax. The overall tax burden equals 18.1 percent of total domestic income. Government spending amounts to 30.6 percent of GDP. The deficit remains over 4 percent of GDP, and public debt equals more than 45 percent of total domestic output.

Regulatory EfficiencyView Methodology

Recent reforms have reduced the number of days and procedures required to launch a new business. The cost of necessary licenses still equals more than twice the average annual income. The informal sector employs a large portion of the workforce. In 2015, the IMF praised government efforts to overhaul the struggling state-owned electricity utility, the structural deficit for which exerts a heavy toll on the budget.

Open MarketsView Methodology

The average tariff rate for Honduras is 5.8 percent. Additional barriers impede imports of rice, corn, and other agricultural goods. The judicial and regulatory systems may act as barriers to foreign investment. The financial sector remains relatively stable and continues to expand. There are two state-owned banks, but private banks dominate the banking sector.

Country's Score Over Time

Bar Graph of Honduras  Economic Freedom Scores Over a Time Period

Country Comparisons

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Regional Ranking

rank country overall change
1Chile77.7-0.8
2The Bahamas70.92.2
3Colombia70.8-0.9
4Saint Lucia70-0.2
5Saint Vincent and the Grenadines68.80.8
6Uruguay 68.80.2
7Barbados68.30.4
8Jamaica 67.5-0.2
9Peru67.4-0.3
10Costa Rica 67.40.2
11Dominica670.9
12El Salvador 65.1-0.6
13Panama 64.80.7
14Trinidad and Tobago62.9-1.2
15Guatemala 61.81.4
16Paraguay 61.50.4
17Dominican Republic610.0
18Nicaragua 58.61.0
19Honduras 57.70.3
20Belize57.40.6
21Brazil56.5-0.1
22Guyana55.4-0.1
23Suriname53.8-0.4
24Haiti51.30.0
25Ecuador48.6-0.6
26Bolivia47.40.6
27Argentina43.8-0.3
28Venezuela 33.7-0.6
29Cuba29.80.2
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