New Report Looks at Honduran Economy Before and Since the Coup

The Center for Economic and
Policy Research released a new
report on the Honduran economy today. The report finds that the
economy has become especially vulnerable to the combined impacts of the
world recession and the political crisis that has followed the military
coup of June 28th.

"The whole region (Central America) has been hit by the U.S.
recession," said Mark
Weisbrot, Co-Director of CEPR. "But things have worsened in
Honduras since the coup in June and it is difficult to see how the
economy will recover without a solution to the political crisis."

The paper, "Honduras:
Recent Economic Performance," by Senior Economist Jose
Antonio Cordero, looks at longer-term trends as well as the
pre-crisis years. It finds that poverty and inequality decreased
significantly during the administration of President Manuel Zelaya,
with rapid growth of more than 6 percent for the first two years. The
government also increased school enrollment significantly by abolishing
school fees, expanded school lunch programs, and raised the minimum
wage by 60 percent, drawing fierce opposition from employers and
business groups.

In 2008, the government used expansionary monetary policy to counteract
the effects of the global credit crunch and recession.

Since the coup, the Central Bank has lost about 18.4 percent of its
international reserves and cannot access the extra reserves that the
International Monetary Fund (IMF) has provided to all member countries,
because of the coup regime's lack of international legality. The
economy is expected to shrink by 2.6 percent this year, and forecasts
have been recently revised further downward.

The Honduran economy is also enormously dependent on remittances, which
peaked at more than 21 percent of GDP in 2006. The continuing decline
in this source of income and foreign exchange will also hurt the
Honduran economy.