Country Report Honduras November 2008

Summary

With 15 months 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 rising inflation.
Following the delayed party primaries on 30th November, the focus will turn to the 2009 elections. At present, the opposition Partido Nacional (PN), 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.

The party primaries have been delayed by two weeks until November 30th because of heavy rains during October that affected around 670,000 people, killing a recorded 33.
With the resignation of the health minister, Elsa Palou, Mr Zelaya's administration suffered its 27th loss of a high-ranked official.
The BCH has reversed its tightening monetary stance to an easing bias to provide liquidity to the banking system and avoid a crisis in the payments system in the wake of the global financial crisis.
In an attempt to avoid further energy cuts, in October Congress approved two contracts with electricity providers, despite the rejection of different sectors and the national audit office.
According to the monthly economic activity index, the economy expanded by just 1% in August, down from 4.9% in July. It grew by 4.4% in January-August, down from 7.3% in the year-earlier period.
The index was dragged down by contractions in commerce, and transport and communications, and by stagnation in the financial sector, which had led growth in the early part of 2008.

Source: Country Report

This report covers the following industry codes:
SIC Code: 60
NAICS Code: 52