Economic Activity in Honduras: Recent Growth and Future Outlook
Economic activity in Honduras grew by 4.7% in the first five months of 2024. The Central American country will grow between 3.5 and 4.5% thanks to greater private consumption in 2024 and 2025. The Honduran Central Bank (BCH) reported that the Monthly Index of Economic Activity (IMAE) continues to show “a positive evolution,” growing by 4.7% in the first five months of 2024.
IMAE Annual Variation
The State issuer indicated in a report that the annual variation of the IMAE (from June 2023 to May 2024) was 3.2%. The IMAE is an indicator that measures the main sectors of a country’s economic activity and is used to make investment decisions. The institution highlighted the “boom” of several economic activities driven by the increase in investment in machinery and transportation equipment and the dynamism in private consumption, which denotes the Honduran economy’s capacity for “resilience” despite the context of uncertainty and geopolitical conflicts at a global level.
Sectoral Growth
The Central Bank of Honduras detailed that the activities with the most significant growth were financial intermediation, insurance and pension funds (15.1%), private construction (12.8%), electricity and water (7.1%), commerce (5.7%), hotels and restaurants (4.9%), and transportation and storage (2.1%). This positive growth in critical sectors provides a reassuring outlook for the Honduran economy.
Challenges in Other Sectors
On the other hand, agriculture, livestock, forestry, and fishing reported a drop of 2.1% due to lower production of coffee, African palm, and shrimp. The manufacturing industry (maquila) registered a 0.2% decrease due to the decline in coffee export volumes, mainly in the markets of Germany, the United States, and Mexico. This slowdown is attributed to the lack of labor due to emigration, adverse weather conditions, which led to diseases such as rust and borer, and higher production costs for implementing actions to control pests,” explained the Central Bank.
Economic Performance in 2023 and Outlook for 2024-2025
According to the Honduran organization, the Honduran economy grew by 3.8% in 2023 despite the adverse international environment and lower external demand. The Monetary Program predicts that the Central American country will grow between 3.5 and 4.5% in 2024 and 2025 thanks to greater private consumption, while inflation will be between 4% and 5% in the two years.
Sectoral Highlights
Insurance Funds and Pensions
Overview: Growth Drivers: Increased contributions from the public and private sectors and higher returns on investments have bolstered this sector.
Key Trends: The expansion of insurance products and pension schemes aimed at improving financial security for individuals has been a significant factor.
Challenges: The sector faces regulatory changes and the need for more robust risk management frameworks.
Impact: It has enhanced financial stability for individuals and institutions and improved overall confidence in long-term financial planning and savings.
Private Construction
Overview: Growth Drivers: Rising demand for residential and commercial properties, driven by urbanization and economic expansion, has fueled this sector’s growth.
Key Trends: Investment in infrastructure projects and real estate development, including housing and office spaces, has increased significantly.
Challenges: Land acquisition, regulatory hurdles, and fluctuating material costs could impact future growth.
Impact: Construction projects create jobs and economic activity in Honduras, boosting related industries such as manufacturing and services.
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Electricity and Water
Overview: Growth Drivers: Infrastructure expansion and service delivery improvements have been central to the growth in this sector.
Key Trends: Investments in renewable energy sources and water management systems have contributed to growth.
Challenges: Addressing the need for modernization and dealing with the impacts of climate change on water resources are ongoing concerns.
Impact: Improved access to reliable utilities supports industrial and residential growth and enhances sustainability through investment in renewable energy sources.
Commerce
Overview: Growth Drivers: Increased consumer spending and growth in e-commerce have been significant contributors.
Key Trends: Expanding retail outlets, online marketplaces, and improvements in logistics and supply chain management are driving growth.
Challenges: The sector faces challenges from economic fluctuations and changing consumer preferences.
Impact: Boost employment opportunities and economic activity in Honduras. It improved consumer access to goods and services.
Hotels and Restaurants
Overview: Growth Drivers: A rebound in tourism and increasing domestic consumption have spurred growth in this sector.
Key Trends: The recovery from pandemic-related restrictions and a rise in domestic and international travel have been key growth factors.
Challenges: The sector must navigate fluctuations in tourism trends and manage operational costs.
Impact: Job creation and increased revenue for businesses. It enhanced cultural and economic exchange through tourism.
Transportation and Storage
Overview: Growth Drivers: Increased trade activities and investments in logistics infrastructure have contributed to sector growth.
Key Trends: The development of transportation networks and advancements in storage solutions have been significant factors.
Challenges: The sector needs to address issues related to infrastructure bottlenecks and sustainability concerns.
Impact: Improved efficiency in trade and supply chain operations. Support for other economic sectors through enhanced connectivity.
Honduras has seen growth across these critical economic sectors due to investment, policy improvements, and increased demand. Each sector has unique drivers and challenges, but collectively, they contribute to the country’s economic development and stability.
In conclusion, economic activity in Honduras in early 2024 demonstrates a positive trajectory driven by robust growth across key sectors. The notable expansion in financial intermediation, private construction, and commerce reflects a resilient economy capable of adapting to global uncertainties. While challenges remain, including issues in agriculture and manufacturing, the overall outlook remains optimistic, with projected growth rates between 3.5% and 4.5% for 2024 and 2025. The diverse contributions from various sectors underscore a dynamic and evolving economic landscape, poised to harness private consumption and strategic investments for sustained development and stability in the coming years.
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