Honduras

Moderate growth dependent on the US economy

Growth accelerated modestly in 2025, driven by an increase in private consumption (83% of GDP), which benefited from a sharp rise in expatriate remittances (+27% year-on-year) to USD 12.2 billion, or 31% of GDP. This cyclical increase can be explained by the tightening of US immigration policy following the revocation of Temporary Protected Status (TPS) for 70,000 Honduran immigrants in 2025 and the entry into force on 1 January 2026 of a 1% tax on remittances from the US. The prospect of these measures prompted expatriates to increase their transfers at the end of the year. In terms of sectors, the services sector was particularly dynamic and was driven by finance, insurance and real estate. The relative stabilisation of the struggling electricity sector also contributed positively to economic activity. Growth is expected to slow slightly in 2026 owing to a decline in purchasing power in the wake of fewer expatriate remittances.

Consumption is benefiting from lower inflation, which is now within the Honduran Central Bank's (BCH) target range of 4.0% ± 1.0 percentage points. The BCH may ease its key interest rate, which has been set at 5.75% since the end of 2024, by 25 to 50 basis points during 2026. Regarding the crawling peg to the dollar, the BCH widened its floating range in 2025 and allowed the lempira to depreciate to support export competitiveness and maintain its foreign exchange reserves. It is expected to maintain this policy in 2026, while taking care to restrict volatility.

The new president’s liberal economic policy plans could have a positive impact on foreign private investment. It suggests better conditions for entrepreneurship and should bring an end to the nationalisation phase that took place under the previous administration, notably the seizure of the private electricity company BELCO by the state-owned utility Empresa Nacional de Energía Eléctrica (ENEE) in May 2024. In addition, Honduras is currently involved in ICSID proceedings with investors in the Próspera free trade zone following Congress’s abolition of the Zones for Employment and Economic Development (ZEDE) in 2022, which has thrown the status of these zones into uncertainty. The country subsequently withdrew from ICSID in 2024. Public investment—focused on energy infrastructure and the health sector—is expected to remain stable in real terms in 2026, at 4% of GDP, subject to congressional approval of the budget, as the new president has centred his programme on reducing public expenditure. The signing of a USD 525?million hydroelectric investment project in partnership with China, currently under negotiation, could also be called into question by the new administration.

Temporary improvement in external accounts

The current account strengthened markedly in 2025, primarily on the back of an exceptional surge in expatriate remittances. This is expected to deliver a slightly positive balance for the first time since 2021, before slipping back into deficit in 2026 due to the structural trade gap. The merchandise trade deficit narrowed only marginally to 20% of GDP (from 23% in 2024), supported by a coffee export boom driven by higher prices (+192% versus 2024), partly offset by strong import growth related to buoyant consumption. This favourable pattern is likely to continue in 2026, aided by lower energy prices (energy accounts for ~13% of goods imports). Exports of agricultural products—coffee, bananas, shrimp, and palm oil—are also expected to improve in 2026, as US growth looks more resilient than initially forecast, though the sector remains exposed to weather risks. The robustness of the US market, which absorbs roughly 50% of Honduras’ exports, could also lift textile output in the maquiladoras—which is responsible for about 44% of total exports—after two years of stagnation. Reflecting the unprecedented current account surplus, the BCH’s foreign-exchange reserves have risen and, as of January 2026, covered 6.2 months of imports (up from 4.3 months in September 2024).

The public deficit widened slightly in 2025, as the low elasticity of tax revenues to exports did not offset the limited increase in social spending. However, it remains in line with the IMF target of -1.5% of GDP. The deficit is expected to be partially absorbed in 2026, due to stagnant public investment and a likely decline in social spending. The expiry of certain advantageous tax statuses, notably the temporary import regime (RIT), a mechanism that exempts inputs used by exporting companies from customs duties, could also lead to an increase in revenue if it is not renewed. However, the so-called “tax justice” bill, which provided for a broadening of the tax base and increased monitoring of public spending, and which was opposed by conservative forces, is likely to be abandoned. Fiscal consolidation is part of a three-year programme signed with the IMF in August 2023 and financed by an Extended Credit Facility and an Extended Credit Mechanism totalling USD 822 million, of which USD 485 million had been disbursed by April 2025. Last, the public debt ratio contracted in 2025 and this trend is expected to continue in 2026. External public debt accounts for 52% of total public debt, 66% of which is held by multilateral partners, particularly the IBRD, under preferential conditions involving interest rates, maturity, and restructuring options. This external public debt represents 67% of total external debt, with the balance corresponding to the liabilities associated with maquiladoras.

Contested general elections plunge the country into political uncertainty

The presidential election of 30 November 2025 was particularly tense, and the publication of the results was delayed for several weeks. Nasry Asfura, the conservative National Party (PNH) candidate, was declared the winner on 24 December with 40.26% of the vote, narrowly defeating his main opponent and the frontrunner, former Vice President Salvador Nasralla of the centreright Liberal Party (PLH), who obtained 39.55%. Both candidates finished well ahead of Rixi Moncada, the candidate of the leftwing Liberty and Refoundation Party (Libre), which has held the presidency since Xiomara Castro’s election in 2021. The election was marked by the involvement of US President Donald Trump, who officially supported Nasry Asfura and pardoned former President Juan Orlando Hernández (2014–2022), a longtime PNH leader sentenced in 2024 to 45 years in prison by a US court for drug trafficking. The outgoing president and Mr. Nasralla denounced what they described as US interference, contested the results and called for a recount. The National Electoral Council (CNE) rejected the request as illegal and Asfura’s victory was officially confirmed. He was sworn in on 27 January. The legislative elections held the same day gave the PNH a relative majority with 49 out of 128 seats in Congress, followed by the PLH (41 seats) and Libre (34 seats). Ongoing negotiations point to a coalition being formed between the PNH and the PLH, which together would secure an absolute majority. The new government will also have to deal with a recalcitrant judiciary in an environment of heightened political tension amid persistent accusations against the presidentelect of embezzling public funds during his term as mayor of the Central District. The country has also been in a state of emergency since November 2022 and continues to face elevated levels of insecurity. Despite an 11% decrease in 2025, Honduras’ homicide rate remains the highest in Central America. This issue, together with corruption, appears to have been a decisive factor behind the electorate’s shift to the right—possibly inspired by the Salvadoran model.

On the international stage, Nasry Asfura's election is expected to mark a rapprochement with the US, which is the main source of remittances. The new Honduran president has hinted at the restoration of diplomatic relations with Israel and the revival of bilateral cooperation in the areas of water and agriculture. He could also reverse the break-off in diplomatic relations with Taiwan that occurred in 2023. The free trade agreement with China, currently under negotiation and initially planned for 2025, could be postponed. Cooperation with Washington in the fight against illegal immigration and drug trafficking is also likely to be beefed-up. Discussions have begun on trade issues and could lead to a downward revision of US customs duties. However, Honduras remains vulnerable to a stricter US immigration policy.

Last updated: January 2026