Economy of Honduras

The agricultural sector began growing at an annual rate of 2.6 percent, slightly above the average for Latin America during that period. Production of basic grains and coffee increased, the export price of bananas was high, and production of pork, poultry, and milk for the domestic market also rose. Additionally, the value of nontraditional fruits and vegetables increased. Honduran agricultural production has seen positive developments, with farmers expanding the area under cultivation to produce more crops. The sector has benefited from increased yields and a rise in the value of various agricultural products.

Honduran electrification has been developing compared to other countries in Latin America. The World Bank estimates that about 36 percent of the Honduran population had access to electricity, including 20 percent of the rural population. The country's total capacity was 575 megawatts (MW), with 2,000 megawatt-hours produced. A significant hydroelectric plant, the 292-MW project at El Cajón, began producing electricity to help address the country's energy needs. Officials noted that the government's decision to provide service to public-sector institutions contributed to a 23 percent increase in public-sector consumption. Experts estimated that additional electrical generation capacity would likely be needed to keep pace with demand. The Honduran Congress assumed authority for setting electric prices and, under the guidance of the World Bank, agreed to a 60 percent increase, with additional increases following. To support residential users, the National Congress initiated a system of direct subsidies.

High interest rates, particularly for housing, continued to impact the Honduran construction industry, but this was partially offset by some public-sector investment. Privatization of formerly state-owned industries through debt swaps also affected construction as prices for basic materials such as cement increased and credit tightened. A major devaluation of the lempira added to the cost of construction imports. Construction contributed 6.0 percent to the GDP.

The Honduran financial sector is relatively small compared to the banking systems of its neighbors. However, it has experienced growth over time. The average annual growth rate of value added to the economy from the financial sector was notable, ranking second-highest in Latin America. Honduras had twenty-five financial institutions with 300 branch offices. Commercial banks in Honduras held a significant portion of the financial system's assets and deposits. Most commercial banks were privately owned by Honduran families, except for the Armed Forces Social Security Institute. Additionally, there were two government-owned development banks in Honduras, specializing in agricultural credit and municipal financing. At the urging of the International Monetary Fund (IMF) and World Bank, Honduras initiated a process of financial liberalization. This included the freeing of agricultural loan rates and later extending to other sectors. Honduran banks were allowed to charge market rates for agricultural loans using their own funds. By law, banks had to report their rates to monetary authorities and could fix rates within a certain range.

Foreign tourists are attracted to Honduras by the Mayan ruins in Copán and coral reef skin-diving off the Islas de la Bahía (Bay Islands). Poor infrastructure, however, has discouraged the development of substantial international tourism. Despite these problems, the number of visitors arriving in Honduras rose from fewer than 200,000. Small ecotourism projects, in particular, are considered to have significant potential.