Honduras: COVID19 in one of the most vulnerable countries to climate change
News from 2020-07-07
Even before the pandemic, things did not look too rosy for the Honduran economy, reports Ivette Velásquez, Programme Coordinator in the KfW office in Tegucigalpa: "Natural disasters, political crises, social changes and also the declining prices of raw materials such as coffee have had a major impact on the country's development. Added to this is the COVID-19 pandemic, the effects of which are not yet fully assessable.
In terms of its structure and equipment, the Honduran health system is not designed to meet the sudden needs of such a devastating pandemic. In total, only 150 people can be given intensive medical treatment in hospitals - a negligible number for a population of over nine million people. By the end of June, the numbers were comparatively moderate, with just over 18,000 infected, 479 dead and 1875 corona patients recovered, which the government attributes to the effectiveness of common treatment methods and medical preparations, among other things.
The backbone of the Honduran economy is formed by micro, small and medium-sized enterprises, which provide around 70% of jobs. Over 900,000 people depend on just under 750,000 businesses to earn a living. The prospects that about one in three of them will close due to the pandemic do not bode well. At present, one in four companies has suspended its employees. In many cases, products and services continued to be sold, at least via the Internet, and thus business could at least be maintained. Gradually, openings were also introduced in various sectors of the economy in Honduras in order to secure as many jobs as possible and also not to endanger the supply chains for production companies. Ultimately, the aim was to supply and feed the population, which had to be secured in a sustainable manner.
The consequences of the pandemic and unemployment are already being felt on the streets of the country's major cities. Whole families are standing at traffic lights asking for food. More than 60% of the Honduran population lives in poverty and is dependent on daily income. According to estimates by the Central Bank of Honduras, this figure could rise to as much as 75%, a flagrant worsening compared to the times before the pandemic. In order to help families affected by the food crisis, the Economic Commission for Latin America and the Caribbean (ECLAC) has proposed that food vouchers, baskets or food stamps be distributed over a period of six months to people at risk of falling into extreme poverty due to falling incomes. But beyond the vouchers, it is important to ensure that overall productivity is maintained in the country, for example through retraining and employment measures. Consideration is therefore being given to linking vouchers, in appropriate cases, to the provision of services in return or work assignments, so that people can return to an orderly working life in due course to ensure the support of their families.
In addition to the pandemic, the Honduran government must also respond to other crises that are looming in the near future. Year after year, climate change brings new diseases, displacement, drought and, as a result, increasing poverty among already impoverished sections of the population. The climatic extremes are well known: drought, floods, landslides. One third of the population lives in the so-called "Dry Corridor", where a large part of the country's production is concentrated. Whole families live from agriculture and suffer from the drought, so they emigrate in order not to starve. And all this is not only here, but also in the centre and north of the country. Temporary shelters are being set up in schools for families who lose their homes. As one of the most vulnerable countries to climate change, Honduras is in a permanent crisis and must now also adapt to the pandemic. This requires effective and transparent government action - policies and measures that promote sustainable development and have a positive impact on the social situation. But all this also requires solidarity among the population.
Grants, transfers, credit programmes, tax deferrals and other measures have been introduced as emergency aid for the population, which will have to be paid off in the future. Thanks to the negotiations with international lenders, especially the IMF, it has been possible to create the conditions in the national budget for extensive support for the economy: to this end, Parliament has approved new borrowing of more than 2 billion dollars.
According to estimates by the Central Bank, following economic growth of 2.7% in 2019, a decline of 2.9% to 3.9% is expected in the current year. The government’s task is now to maintain macroeconomic stability, safeguard public spending and protect investments.
According to World Bank estimates, the Honduran economy should be quite capable of recovering in the short to medium term, albeit at the price of a slump in growth, which is likely to be quite significant compared with the 2009 crisis. The recession could last until 2021, and the main challenge for Honduras is likely to be to strike a balance between the highest possible economic growth rates and the pervasive need for social protection.