Country Report Honduras January 2009

Outlook for 2009-10

• With one 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.
• The focus is turning to the November 2009 elections. As the economy weakens, the opposition Partido Nacional (PN), last in power in 2002-06, is the narrow favourite for the presidency.
• Despite the government's commitment under the IMF programme to reduce the fiscal deficit, 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 in 2009. The 2010 recovery will be modest.
• Given the deteriorating external accounts, there are growing concerns over their financing, despite access to concessionary financing and aid flows.

Monthly review

• The party primaries took place on November 30th. Both parties elected their presidential candidates, as well as their presidential designates.
• The PN's Porfirio Lobo Sosa appeared to have an edge in the wake of the primaries as he was not part of Mr Zelaya's unpopular administration and obtained more votes on his own than the PL's candidates combined.
• By mid-December the government had not sent the 2009 budget to Congress, raising the likelihood that the 2008 budget would need to be rolled over into the first couple of months of 2009.
• In November the BCH announced further liquidity-raising measures to limit the adverse effects of the global credit crunch. It reduced short-term interest rate in two stages in December, from 9% to 7.75%.
• According to the monthly economic index, activity contracted by 0.8% in October, reflecting in part the impact of the global crisis on economic activity, and especially output from the financial sector, which contracted by 22%.
• A decline in fuel prices and public transport fares helped consumer prices to fall by 0.2% in November, bringing 12-month inflation down to 10.9%.

Source: Country Report

This report covers the following industry codes:
SIC Code: 48
NAICS Code: 517

This report covers the following industry codes:
SIC Code: 48
NAICS Code: 517