Country Report Honduras December 2008

Outlook for 2009-10

• With just over a year left in power, Manuel Zelaya of the left-of-centre Partido Liberal (PL) is rapidly losing public support in the face of his government's lack of success in tackling crime, corruption and double-digit inflation.
• After the party primaries in November, the focus will turn to the 2009 elections. As the economy weakens, the opposition Partido Nacional, last in power in 2002-06, is the narrow favourite to win the presidency.
• Despite the government's commitment under the IMF programme to reduce the fiscal deficit from 2.3% in 2007 to 1.5% in 2008, we expect the target to be missed by a wide margin, given the economic slowdown and the 2009 polls.
• As the Central Bank's policy reversal to an easing stance is likely to raise pressure on the currency, it will probably attempt once more to make the exchange rate more flexible.
• A recession in the US and tighter global credit conditions, combined with decelerating domestic demand, will slow GDP growth from late 2008 and in 2009. The 2010 recovery will be modest.
• Given the deteriorating external accounts, there are rising concerns over the financing of the external imbalance, despite access to concessionary financing and aid flows.

Monthly review

• Although the electoral tribunal had declared that Elvin Santos could not stand for the presidency, as he has in the past been acting president, the vice-president attempted to resign, but this was not accepted by Congress.
• The party primaries were officially delayed to November 30th because of a state of emergency as a result of bad weather conditions during October.
• Government and business representatives announced price cuts for 25 basic consumer goods. According to a regional consumer survey, Honduras is the most expensive Central American country.
• After peaking at 14% in August, consumer price inflation eased to 13.1% in October, reflecting falls in global commodities prices and a deceleration in domestic credit growth.
• The sharp widening of the current-account deficit in the first half of 2008 was largely caused by a much wider trade deficit. Larger deficits in the income and services accounts also contributed to the deterioration.

Source: Country Report

This report covers the following industry codes:
SIC Code: 49;1;60
NAICS Code: 22;11;52