Honduras economy shrank 6.3% in January

The Honduran economy shrank 6.3% year-on-year in January, according to the monthly economic activity index, a GDP proxy, of the central bank (BCH).

Most sectors contracted, especially agriculture, manufacturing, transportation, construction and hotels and restaurants. However, telecommunications and financial services showed growth.

“This performance is the product of the continuing health crisis, to which is added the damage caused by tropical storms Eta and Iota, which affected agricultural crops and whose negative consequences will continue during 2021,” stated the report.

Agriculture fell 16.1%, especially the cultivation of melons, watermelons, sugarcane, African palm, bananas and basic grains, following the storms. As tourism struggles across the region, a 31.5% drop in hotel and restaurant activity was expected but further sharp falls were recorded in transportation (26.4%) and private sector construction (17.0%). 

Textiles and paper manufacturing shrank 10.8% and 33.9% respectively. Lower demand in the US for clothing and fewer packaging needs for the agro-industrial sector were the explanations given. However, higher demand for parts by the US auto industry saw an increase of 25.6% in machinery and equipment manufacturing.

New biosafety measures introduced by the government and public awareness of spreading COVID-19 cases were highlighted as reasons behind the fall in transportation. 

The 2.2% growth in telecommunications was attributed to increased demand for fixed and mobile broadband internet. The report said this was due to the boom in teleworking and online classes during the pandemic.

Honduras’ economy was projected to contract 7-8% in 2020 but the storms may push this towards 9.5%. A clearer picture will be known when the central bank releases its 2021-22 monetary program report, which is due imminently.