Honduras Economic Outlook
Having expanded at an annual rate of 1.9% in the first quarter, the economy should pick up in Q2: Average annual economic activity growth in the quarter was above Q1’s average. Private consumption likely performed well in the quarter due to softening price pressures and strong remittances growth amid a robust U.S. labor market. In addition, merchandise exports rebounded year on year in Q2. That said, the rebound was weak, hinting at a drought-induced decrease in agricultural output. In Q3, annual GDP growth is projected to lose some momentum from Q2 projections due to the deceleration of the U.S. economy capping exports and remittance inflows. In other news, on 11 August, the IMF granted the country USD 830 million in credit. The three-year deal aims to support fixed investment and ensure macroeconomic stability.
Inflation came in at 5.7% in August, up from 5.1% in July. Our panelists see inflation averaging lower this year than last but remaining above the Central Bank’s target range of 3.0–5.0%. Drought conditions, exacerbated by El Niño, and an increase in international oil prices are expected to intensify inflationary pressures in the second half of the year.