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Honduras at a Glance: 2006-07

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Honduras at a Glance: 2006-07 Country Report Honduras Honduras at a glance: 2006-07 OVERVIEW Manuel Zelaya Rosales of the Partido Liberal (PL) took office as president of Honduras for a four-year term on January 27th 2006, having beaten the candidate of the incumbent Partido Nacional (PN), Porfirio Lobo Sosa, in the November 27th 2005 election by just 3.7% of the total vote. The PL failed narrowly to gain a simple majority in the National Congress, winning 62 of the 128 seats, and will be reliant on the support of other parties in order to pass legislation. The Economist Intelligence Unit expects broad policy continuity in 2006-07, focusing on goals agreed with the IMF under the IMF-World Bank poverty reduction and growth facility (PRGF). Honduras will benefit from debt relief under the heavily indebted poor countries (HIPC) initiative during 2006-07. Average annual GDP growth will slow to 3.6% in 2006-07, and inflation will remain outside government targets. The exchange rate will stay broadly stable in real terms against the US dollar. Slowing export growth in line with weaker global growth, and rapid growth in the import bill, associated with high oil prices and relatively strong domestic demand, will result in a widening current-account deficit. Key changes from last month Political outlook • Despite its weak position in Congress, the government in March passed the necessary legislation in areas such as intellectual property rights, government procurement, customs procedures, phytosanitary measures and changes to the penal code, for inclusion in the Dominican Republic-Central American Free-Trade Agreement (DR-CAFTA) on April 1st. Economic policy outlook • The BCH has reduced the Tasa de Interés de Política Monetaria (TPM, the short-term interest rate that reflects the BCH’s monetary targets) from 7% to 6.75% and suspended the issue of US dollar-denominated monetary certificates used as a sterilisation tool. Economic forecast • We have revised downward our consumer price inflation (CPI) forecast for 2006-07 following signs of easing pressure on prices in early 2006. We now expect consumer price inflation to end 2006 at 7.3%, falling to 6.2% at end 2007. April 2006 The Economist Intelligence Unit 26 Red Lion Square London WC1R 4HQ United Kingdom The Economist Intelligence Unit The Economist Intelligence Unit is a specialist publisher serving companies establishing and managing operations across national borders. For over 50 years it has been a source of information on business developments, economic and political trends, government regulations and corporate practice worldwide. The Economist Intelligence Unit delivers its information in four ways: through its digital portfolio, where the latest analysis is updated daily; through printed subscription products ranging from newsletters to annual reference works; through research reports; and by organising seminars and presentations. The firm is a member of The Economist Group. London New York Hong Kong The Economist Intelligence Unit The Economist Intelligence Unit The Economist Intelligence Unit 26 Red Lion Square The Economist Building 60/F, Central Plaza London 111 West 57th Street 18 Harbour Road WC1R 4HQ New York Wanchai United Kingdom NY 10019, US Hong Kong Tel: (44.20) 7576 8000 Tel: (1.212) 554 0600 Tel: (852) 2585 3888 Fax: (44.20) 7576 8500 Fax: (1.212) 586 0248 Fax: (852) 2802 7638 E-mail: [email protected] E-mail: [email protected] E-mail: [email protected] Website: www.eiu.com Electronic delivery This publication can be viewed by subscribing online at www.store.eiu.com Reports are also available in various other electronic formats, such as CD-ROM, Lotus Notes, online databases and as direct feeds to corporate intranets. For further information, please contact your nearest Economist Intelligence Unit office Copyright © 2006 The Economist Intelligence Unit Limited. All rights reserved. Neither this publication nor any part of it may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of The Economist Intelligence Unit Limited. All information in this report is verified to the best of the author's and the publisher's ability. However, the Economist Intelligence Unit does not accept responsibility for any loss arising from reliance on it. ISSN 1473-9011 Symbols for tables “n/a” means not available; “–” means not applicable Printed and distributed by Patersons Dartford, Questor Trade Park, 151 Avery Way, Dartford, Kent DA1 1JS, UK. Honduras 1 Contents Honduras 3 Summary 4 Political structure 5 Economic structure 5 Annual indicators 6 Quarterly indicators 7 Outlook for 2006-07 7 Political outlook 8 Economic policy outlook 10 Economic forecast 13 The political scene 15 Economic policy 18 The domestic economy 20 Agriculture 21 Manufacturing 22 Financial services 23 To u r i s m 23 Foreign trade and payments List of tables 9 International assumptions summary 11 Forecast summary 15 Central government finances 17 Gross domestic product by expenditure 18 Production indicators 18 Consumer price inflation 20 Selected industrial production 21 Credit to the private sector 23 Merchandise trade 25 Balance of payments List of figures 11 Gross domestic product 11 Consumer price inflation Country Report April 2006 www.eiu.com © The Economist Intelligence Unit Limited 2006 Honduras 3 Honduras April 2006 Summary Outlook for 2006-07 Manuel Zelaya Rosales of the Partido Liberal (PL) took office as president of Honduras for a four-year term on January 27th 2006, having beaten the candidate of the incumbent Partido Nacional (PN), Porfirio Lobo Sosa, in the November 27th 2005 election by just 3.7% of the total vote. The PL failed to gain a simple majority in the National Congress, winning 62 of the 128 seats, leaving it reliant on the support of other parties in order to pass legislation. The government will seek to relax some of the programme targets agreed with the IMF under the IMF-World Bank poverty reduction and growth facility (PRGF) in order to release funds to fulfil election campaign pledges. Honduras will benefit from debt relief under the heavily indebted poor countries (HIPC) initiative during 2006-07. Average annual GDP growth will slow to 3.6% in 2006-07, and inflation will remain outside government targets. The exchange rate will stay broadly stable in real terms against the US dollar. An increasing trade deficit as a result of strong, investment-driven import demand will cause the current- account deficit to widen in 2006-07. The political scene During his first few weeks in office, Mr Zelaya has introduced a number of measures aimed at making rapid progress on some of his campaign commitments, focusing on increasing citizen participation in political life and increasing government accountability; promoting human development, including free school enrolment; and reducing unemployment. Economic policy Preliminary figures published by the Central Bank indicate that the central government deficit narrowed to La4.7bn (US$250m) in 2005, equivalent to 3.0% of GDP, compared with 3.4% of GDP in 2004, and in line with the target set out under the PRGF agreed with the Fund in 2004. The domestic economy In 2005 real GDP growth slowed year on year to 4.2%, within the 4.0%-4.5% range estimated by the Central Bank. Growth was led by private consumption, following sustained growth of remittances from Hondurans working abroad and an expansion in consumer credit stimulated by lower interest rates. Foreign trade and payments Strong growth in earnings from the services sector, attributable to the performance of maquila, tourism, and in transfers from abroad (mainly workers’ remittances) contributed to a substantial narrowing of the current- account deficit in 2005, to US$42.3m (0.5% of GDP), down from US$399.4m (5.3% of GDP) in 2004. Editors: Ian Emery (editor); Martin Pickering (consulting editor) Editorial closing date: March 20th 2006 All queries: Tel: (44.20) 7576 8000 E-mail: [email protected] Next report: Full schedule on www.eiu.com/schedule Country Report April 2006 www.eiu.com © The Economist Intelligence Unit Limited 2006 4 Honduras Political structure Official name Republic of Honduras Form of state Unitary republic The executive President, elected for a four-year term National legislature National Congress, comprising one member and one substitute member elected for every 35,000 people or fraction over 15,000 Legal system US-style Supreme Court system National elections November 2005 (legislative and presidential); next elections due November 2009 (legislative and presidential) National government Following his victory in the November 27th 2005 election, Manuel Zelaya Rosales, of the Partido Liberal (PL), took office as president on January 27th 2006 Main political organisations Government (from January 27th 2006): Partido Liberal (PL) Opposition: Partido Nacional (PN); Partido de Innovación Nacional y Unidad-Social Demócrata (PINU-SD); Partido Demócrata Cristiano (PDC); Partido de Unificación Democrática (PUD) President Manuel Zelaya Rosales Vice-president Elvin Santos Key ministers Agriculture Hector Hernandez Culture & sports Rodolfo Pastor Fasquel Defence Arístides Mejía Economy, industry & commerce Lizzy Azcona Bocok Education Rafael Pineda Ponce Finance Hugo Noé Pino Foreign affairs Milton Jimenez Puerto Health Orizon Velázques Interior & justice Jorge Arturo Reina Labour & social security Riccy Moncada Natural resources & environment Mayra Mejía del Cid Presidency Yani Rosenthal Hidalgo
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