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Investing.com -- Moody’s Ratings has affirmed Honduras’ local and foreign-currency long-term issuer and senior unsecured ratings at B1 with a stable outlook.
The rating affirmation reflects Honduras’ relatively strong government fiscal position and steady real GDP growth, balanced against structural constraints from low economic development levels and weak institutional framework.
Honduras has maintained moderate fiscal deficits and a low, stable debt burden, demonstrating resilience to shocks. General government debt declined to approximately 43% of GDP in 2024 from 54% in 2020, supported by robust economic growth and budget under-execution that helped contain spending.
The economy grew 3.6% in both 2023 and 2024, in line with its long-term average, driven by resilient private consumption and investment. Moody’s expects growth to remain around 3.5% in 2025-26, gradually moderating over time amid potential headwinds from more restrictive U.S. immigration and trade policies.
Remittances continue to play a crucial role in Honduras’ economy, supporting domestic consumption and accounting for around 25% of GDP.
The stable outlook indicates Moody’s expectation that the current balance between credit strengths and challenges will persist through Honduras’ next general election in November 2025. The agency also expects Honduras to continue adhering to its IMF program targets through September 2026, when its current three-year Extended Fund Facility and Extended Credit Facility program ends.
Despite these strengths, Honduras faces significant structural constraints, including its small economy size ($37 billion nominal GDP in 2024), very low income levels (GDP per capita of $7,600 in 2024), and relatively weak institutions and governance. The country also ranks among the world’s most vulnerable to climate disasters, particularly droughts and hurricanes.
Political polarization remains high in Honduras, with contentious relations between ruling and opposition parties limiting the government’s ability to implement significant policy changes, including tax reform, increased social spending, and anti-corruption efforts.
Factors that could lead to a rating upgrade include evidence of durable fiscal consolidation paired with successful implementation of reforms that strengthen economic resilience, investment climate, and growth prospects. Conversely, rising debt metrics from lower growth or relaxed fiscal constraints could trigger a negative rating action.
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