End of Year Outlook

During 2025, the Honduran economy followed a relatively favorable trajectory. The Monthly Economic Activity Index registered cumulative growth of 4.3% through March, 3.9% through June, and 3.6% through September, indicating that the momentum was strongest at the start of the year and fell slightly by the third quarter, without losing the pace set in the early months.

Two clear sources drove these figures. First, a growth in domestic demand: households had more spending capacity from the combination of employment and remittances, which boosted trade and services. Preliminary figures from the Instituto Nacional de Estadísticas (INE)Footnote 1^[1] show that labor force participation rose 2.2 percentage points (pp) and unemployment fell from 5.2% to 4.9%. Second, the agro-industrial export sector, where coffee was the decisive factor, although manufacturing and transportation activities also contributed. The 2025 expansion did not depend on a single sector, but on various sectors that reinforced each other: higher household incomes → more consumption → more business activity.

Looking towards the end of the year, this performance suggests Honduras will finish with an expansion similar to 2024 (3.6%), with the difference that in 2025 the external pillar —remittances— was considerably stronger.

For most of 2025, inflation moved at moderate levels within the BCH's tolerance band (4% ±1 percentage point). The data showed a relatively stable trend: 4.49% year-on-year in March, 4.67% in June, and 4.55% in September. This allowed the year to pass without a sharp deterioration in the cost of living and provided greater stability for households and businesses.

Toward the end of the, however, the dynamic changed. In November 2025, year-on-year inflation rose to 5.09%, moving above the upper limit of the tolerance band — a deviation the BCH has described as transitory. This uptick was driven mainly by seasonal and weather-related factors typical at the end of the year: price increases in agricultural food products affected by a temporary supply shortfall from recent weather shocks, higher prices for meat and processed products common in the season, and some adjustments in rents and services. For December 2025, inflation fell back to 4.98%.

One important detail: part of the stability seen through most of the year was sustained through fuel and electricity subsidies. The BCH estimates that without these, inflation would have been higher — subsidies reduced price increases by around 0.48 pp in March, 0.35 pp in June, and 0.62 pp in September (BCH I, BCH II, BCH III; 2025).

When the BCH makes decisions to control inflation, it looks not only at the headline figure but also at core inflation, which excludes highly volatile prices (such as fuels, energy, and some fresh food) and reflects more persistent pressures linked to domestic demand. Here lies a key nuance of 2025: although headline inflation fell and held within the target through October 2025, core inflation remained consistently above 5%, suggesting that the monetary policy measures taken at end-2024 had limited effect on controlling inflation (see Infobyte Behind the historic Monetary Policy Rate increase for a more detailed explanation).

This leaves a dual reading for 2026. On one hand, the country managed to avoid an inflationary surge in the first part of the year, but closes with uncertainty. On the other, if the government were forced to reduce fuel and energy subsidies — due to limited fiscal space or shifts in international prices — additional pressure on the cost of living could emerge.

Credit trends in 2025 cannot be understood without looking at the monetary decisions made at the end of 2024. That year, the BCH implemented the largest increase in the Monetary Policy Rate (MPR) in its history: from 3% to 4% in August, then to 5.75% in October. The main objective was to rein in inflationary pressures that had pushed inflation above the set target while also protecting the country's external stability amid high international rates. Following the historic MPR increase and liquidity absorption through open market operations (OMOs), 2025 saw higher bank lending rates and slower credit growth.

The BCH reports that although deposits grew strongly — partly driven by higher remittances — banks placed a significant share of those resources in BCH instruments, leaving less room to expand lending. As a result, new credit to the private sector still grew, but at a slower pace: 7.8% year-on-year in January 2025 and 5.0% in October.

The most affected sectors were manufacturing and real estate, with a visible impact on private construction. The BCH's Encuesta de Construcción de Obras Privadas Techadas reported a decline in built area, particularly in commercial projects (restaurants, hotels, educational centers, hospitals, and similar).

Two of the most notable economic milestones of 2025 came from the external sector. For the first time since 2020, Honduras will likely close 2025 with a current account surplus — meaning the country is receiving more income from abroad than it is sending out. This is driven mainly by record remittances and a coffee price boom.

Between January and September 2025, the value of coffee exports reached a historic high of approximately USD 1.827 billion — the highest on record and nearly double that for the same period in 2024. Breaking down "value = price × volume," export volume did grow, though within moderate ranges, while the average price was the main driver: it rose roughly 79% year-on-year.

This boom is an important opportunity to translate into productivity gains and sectoral resilience. Coffee is the country's main agricultural crop; after years of stagnation due to weather, disease, and aging plantations, the current windfall should be used to accelerate plantation renewal, raise productivity, and consolidate higher-quality niches.

This situation unfolds while the EU has extended the application of the EUDR "zero deforestation" regulation: following a previous postponement that moved the deadline to late 2025, a second extension was approved to give producers and buyers more time to comply. Representatives of the sector report that Honduras has used this year to accelerate preparation: progress was made in certifying farms and productive units, a land-use map of coffee-growing areas and crop maps are now available, and geolocation and environmental legal verification platforms were strengthened — though gaps remain (only 58% of units were ready before the extension).

At the same time, remittances showed equally historic growth: 25.0% through March, 25.3% through June, and 26.2% through September, reaching more than USD 11.106 billion in the first eleven months of 2025. This increase is linked to precautionary transfers driven by stricter U.S. immigration policy. What matters here is not only the growth figure but its effect: remittances raised household incomes, sustained consumption, and fed the financial system with more deposits. But they also leave a question for 2026: how much of this increase is sustainable if the migration environment changes?

The increase in foreign exchange inflows showed up clearly in international reserves. Net international reserves (RIN) rose to record levels: USD 8.4035 billion in March (around 5.1 months of import cover), USD 9.0107 billion in June (around 5.6 months), and USD 9.6963 billion in September (approximately 6 months) — nearly USD 1.650 billion more than at the end of 2024 Footnote 2^[2]. These reserves matter because they act as a buffer: they allow the country to meet its external obligations, stabilize the foreign exchange market, and absorb international shocks without disruption.

Despite rising foreign exchange inflows, the nominal exchange rate has increased, particularly since October 2024. Before that point the external value of the currency had remained relatively stable, but from September 2024 to November 2025 the exchange rate rose by 1.5 lempiras. This outcome is not straightforward to explain, mainly because Honduras operates under a managed float: the BCH allows gradual adjustments to reflect macroeconomic fundamentals and build reserves, while avoiding sharp movements. So even with more foreign exchange, the rate kept rising, closing 2025 at L26.47 per dollar, a year-on-year increase of 4.8%.

The year had a less favorable face for the banana — until 2024 the country's second-largest general merchandise export. For the second consecutive year, export value fell; through September 2025 it was roughly half of what was exported in 2023. While price factors played a role, the main explanation was lower production due to weather shocks, particularly the aftermath of Tropical Storm Sara in November 2024.

This reinforces a structural lesson: Honduras can benefit from a coffee boom, but remains highly vulnerable to weather shocks in other key crops. Climate adaptation and resilience investment should not be delayed further.

On the fiscal front, 2025 was a year of mixed signals:

• The Ley de Justicia Tributaria was not passed, leaving a fiscal reform pending.
• On a positive note, Honduras regained eligibility for the Millennium Challenge Corporation (MCC), although it was not ultimately selected as a beneficiary of the organization's programs.
• Budget execution returned to pre-pandemic levels (70% through October 2025) after several years of low execution.

  Table 1

  Public sector budget execution through October of each year, 2019–2025 (%)

  Year	Budget execution
  2019	70
  2020	65
  2021	66
  2022	57
  2023	61
  2024	64
  2025	70

  Source: Secretaría de Finanzas

  One of the most important forward-looking figures is the debt warning: between 2026 and 2027, debt service payments (principal repayment + interest + fees) are projected at a minimum of L61.187 billion and L76.432 billion, respectively (equivalent to USD 2.343 billion and USD 2.926 billion) — roughly double what has been paid in 2025 Footnote 3^[3]. This makes planning in advance essential to avoid greater financial strain and protect the macroeconomic stability achieved in 2025.

The year leaves a clear picture: Honduras managed to sustain moderate growth and conditional price stability in an uncertain international environment. But much of that favorable outcome came from external factors. Coffee and remittances gave households, reserves, and the external balance a historic reprieve — the kind that does not come every year and is unlikely to repeat itself.

The challenge, then, is not just to mark the achievement, but to build on it. Among the priorities this end of the year highlights:

1. Use the coffee boom to transform productivity and quality, not just to generate temporary income.
2. Maintain inflation stability without relying too heavily on subsidies, given fiscal constraints.
3. Reignite investment and credit in sectors affected by high rates, without putting the inflation objective at risk.
4. Prepare a clear strategy for the 2026–2027 debt maturities.
5. Sustain budget execution levels, even when transitions in government make achieving that goal challenging.
6. Build climate resilience in the agricultural sector, to prevent shocks like those affecting banana plantations from continuing to erode export value.