Fostering Private Sector Development for a Resilient and Inclusive Economy
Honduras is posed for strong economic growth and development but must address its adverse business climate environment which severely undermines competitiveness, productivity, and return on investment across the private sector. The economic shocks induced by the COVID-19 crisis and hurricanes Eta and Iota have underscored the urgent need to create high-quality jobs and accelerate private sector growth.
The country’s young and growing population is yielding a demographic dividend, which presents new opportunities for economic growth and diversification, especially in service sectors such as business-process outsourcing (BPO) and in the development of digital financial services (DFS). A variety of microclimates along the country’s fertile plains yield diverse agricultural products, while Honduras’s growing manufacturing sector (close to 20 percent of gross domestic product) continues to diversify, supported by free-trade and export-processing zones, trade liberalization policies, and the country’s strategic geographic location.
Fully leveraging the potential of these sectors will require the government to address binding constraints on private sector development. This CPSD proposes recommendations designed to address major challenges and enable the growth of more diverse and sophisticated markets in Honduras. These recommendations are intended to inform the Honduran government’s near-term policy priorities and underpin a robust dialogue between policy makers, the private sector, and Honduras’s development partners.