- GDP (PPP):
- $49.2 billion
- 3.7% growth
- 3.9% 5-year compound annual growth
- $5,212 per capita
- Inflation (CPI):
- FDI Inflow:
Honduras’s economic freedom score is 61.1, making its economy the 93rd freest in the 2020 Index. Its overall score has increased by 0.9 point, led by an improvement in the property rights score. Honduras is ranked 18th among 32 countries in the Americas region, and its overall score is approximately equal to the regional and world averages.
The Honduran economy has remained moderately free for the third year in a row. That progress has been matched by solid growth in GDP over the past five years.
Promoting investor confidence and fighting corruption are among the policy priorities of the Hernández administration’s second term. To achieve those goals, which would also help to ensure that Honduras remains on an upward trajectory toward greater economic freedom, the government could prioritize improvements in labor freedom and business freedom with particular emphasis on reducing corruption and improving the effectiveness of the judiciary.
Honduras is Central America’s second-poorest country and has one of the world’s highest homicide rates. Gangs and transnational criminal networks prey on communities, often in collusion with authorities. The country’s location leaves it vulnerable to narco-trafficking. Although President Juan Orlando Hernández of the center-right National Party remains tainted by accusations of fraud arising from his 2017 reelection, U.N.-led talks have contributed to political stability, and the government has a working majority in Congress. In 2018, the government adopted U.N. proposals regarding electoral reforms and human rights. Historically dependent on exports of bananas and coffee, Honduras has diversified its export base to include apparel and automobile wire harnesses, but the economy remains heavily dependent on remittances.
Although the law recognizes secured interests in movable and real property, approximately 80 percent of the privately held land in Honduras is either untitled or improperly titled. Because the judicial system is weak and politicized, it often takes years to resolve title disputes. Rampant corruption and weak state institutions make it virtually impossible to combat threats posed by violent transnational gangs and organized criminal groups.
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 22.8 percent of total domestic income. Government spending has amounted to 26.9 percent of the country’s output (GDP) over the past three years, and budget deficits have averaged 0.2 percent of GDP. Public debt is equivalent to 40.3 percent of GDP.
The overall business environment is burdensome. Lack of regulatory transparency and widespread violence are major challenges to the operation of private businesses. There is a high level of informality. The government maintains price controls for basic food items, fuel, water, telecommunications, and ports and often imposes temporary price controls on other basic goods.
The total value of exports and imports of goods and services equals 102.1 percent of GDP. The average applied tariff rate is 2.8 percent, but various nontariff barriers remain onerous. Although the government is generally open to foreign investment, weak institutions, exacerbated by high levels of crime, hamper the overall investment environment. Reforms in recent years appear to have strengthened and stabilized the banking sector.