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Honduran economy seen shrinking more after storms, central bank cuts rates

11/23/2020 | 06:00pm EST

TEGUCIGALPA, Nov 23 (Reuters) - The Honduran central bank said on Monday that devastation caused by Hurricane Eta will shave an additional percentage point from economic growth, which along with the fallout from coronavirus will lead to a contraction of 8-9% in 2020.

"Taking into account the damage caused by Storm Eta, we have made a new calculation and the contraction increases by 1 percent, and once you include the forecast for COVID-19, we are talking about a range of between 8 and 9 percent," said central bank president Wilfredo Cerrato.

That would make it the sharpest recession on record. The current nadir was in 1954, when the Honduran economy contracted by 6.5%, according to the central bank president.

To prop up the Central American nation's ailing economy, the central bank cut its benchmark interest rate by 75 basis points to 3.0%, its lowest level since 2005.

"The monetary policy rate has been lowered to 3 percent from 3.75 (percent) to ease and stimulate credit," Cerrato said.

Earlier this month Honduras and neighboring Central American nations were walloped by the one-two punch of Eta and a few days later Hurricane Iota, which unleashed torrential rains that caused widespread deadly flooding and mudslides. (Reporting by Gustavo Palencia; Writing by Anthony Esposito; Editing by Frank Jack Daniel and David Gregorio)

© Reuters 2020
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