An International Monetary Fund (IMF) staff team led by Mr. Roberto
Garcia–Saltos visited Tegucigalpa from May 22 – June 1 to review economic
developments and authorities’ implementation of their Fund-supported
program during 2016 and the first quarter of 2017. At the conclusion of the
visit Mr. Garcia–Saltos issued the following statement:
“The team is encouraged by the continued strengthening of the Honduran
economy, including advances in the security situation.
“The economy grew steadily at 3.6 percent in 2016. Adequate macroeconomic
policies, low oil prices and moderate exchange rate depreciation kept
inflation at end-2016 low at 3.3 percent— below the central bank inflation
target band of 4.5 ± 1 percent. The non-financial public sector (NFPS)
posted a historically minimum deficit of 0.5 percent of GDP (3.9 percent in
2014) and the central government reached a deficit of 2.8 percent of GDP
(4.5 percent of GDP in 2014). The external current account deficit has
narrowed to 3.8 percent of GDP in 2016 (7.3 percent in 2014) as the decline
in imports and the increase in remittances more than offset a decrease in
exports. International reserves increased to the equivalent of 5 months of
imports (4.3 months in 2014).
“The outlook for 2017 remains favorable. Real GDP growth through 2017 Q1 is
estimated between 4 to 4.5percent (y/y) —owing to steady expansion of
private consumption and strong growth of exports— broadly consistent with
staff’s projection of 3.5 percent for the year. This projected growth is
supported by scaled up public infrastructure investment and active monetary
policy. Inflation through May 2017 picked up to 4.1 percent (y/y) —owing to
recovery of domestic demand and higher international oil prices—, and is
consistent with staff’s projection of 4.75 percent (y/y) for end-2017,
within the central bank target band for inflation. In line with the
existing program, the NFPS deficit is expected to increase —but be below
the 1.5 percent of GDP ceiling established in the Fiscal Responsibility
Law— to accommodate planned investment in infrastructure. A stronger policy
mix and improved external conditions are expected to lead to a higher
accumulation of international reserves. At the same time, consistent with
expanding economic activity and greater private sector confidence, credit
to the private sector is expected to grow by 10 percent in nominal terms,
in line with a sustainable pace of financial deepening.
“The team encourages the government to press forward with their
macroeconomic, financial and tax administration policies to achieve
stronger and more inclusive growth. The discussions have been productive,
and the government concurred with the team about the need to meet the
end-June 2017 quantitative targets to complete the pending reviews under
the Fund-supported program.
“The team welcomes the authorities’ decision to keep the target for the
deficit of the NFPS at 1.5 percent of GDP in 2017 and an accumulation of
central bank international reserves of US$311 million, consistent with the
objectives of the Fund-supported program. These objectives include an
additional reduction of the central government deficit to 3.2 percent of
GDP. The team also welcomes the authorities’ proposal to establish new
structural benchmarks on preparing a customs agency strategic plan and make
operational the Financial Stability Council following the reforms to the
financial system law approved in December 2016.
“To ascertain the compliance with the end-June 2017 targets and conclude
discussions of the pending reviews, the team will return to Tegucigalpa
later in August 2017.
“The team met with Minister Coordinator of Government, Jorge Ramon
Hernandez-Alcerro, Head of the Economic Cabinet and Minister of Finance
Wilfredo Cerrato, Central Bank Governor Manuel Bautista, Minister Director
of the Tax Agency Miriam Guzman, President of the National Commission of
Banking and Insurance Ethel Deras, Vice Minister of Public Credit and
Investment Rocio Tábora and other senior government officials as well as
with representatives of private sector institutions and of the
international community.
“The team would like to thank the authorities for a fruitful and cordial
dialogue, as well as for their cooperation.”
