Honduras

Abstract

Honduras is Central America’s
 second-largest country with a population of more than 8
 million and a land area of about 112,000 square kilometers.
 The 20th century witnessed a profound economic
 transformation and modernization in Honduras. Honduras’
 persistent poverty is the result of long-term low per capita
 growth and high inequality, perpetuated by the country’s
 high vulnerability to shocks. First, over the past 40 years
 the country has experienced modest growth rates marked by
 considerable volatility. Second, high levels of inequality
 have weakened the ability for growth to reduce poverty by
 limiting the extent to which a large segment of the
 population is able to fully access physical and human
 capital. Third, a large share of the population is
 vulnerable and exposed to regular shocks - both large and
 small which has exacerbated poverty by destroying or slowing
 asset accumulation. This systematic country diagnostic (SCD)
 explores the drivers of these development outcomes in
 Honduras, and reflects on the policy priorities that should
 underlie a development strategy focused on eradicating
 poverty and boosting shared prosperity. After identifying a
 number of critical factors affecting the country’s
 development outcomes, the SCD concludes that there is a need
 for a comprehensive agenda that tackles simultaneously the
 problems that have kept the country in a low development
 equilibrium for many decades, as well as emerging challenges
 that have the potential not only to prevent progress but
 also worsen the current situation. The SCD also argues that
 the policy agenda needs to be ambitious and move away from
 marginal interventions in order to move Honduras from a
 situation where its economic potentials are just potentials
 to another where they become actuals.