Unpaid Bills Stalls Construction And Prompts Forecast Revision
BMI View: Public sector construction work has ground to a halt in Honduras after unpaid bills have forced workers to down tools. The government owes the industry an estimated US$100mn in payment for work, a symptom of the growing fiscal crisis underway in the country. The work stoppage has prompted a slight downward revision in our already weak 2013 growth outlook for the sector, from 2.7% to 2.1% y ear -o n -y ear , with further downside if the debacle is not resolved promptly.
Construction work at over 100 sites across Honduras was halted on February 5 th after members of the Construction Industry Chamber went on strike over unpaid government bills. In January the members had threatened to strike if bills were not paid by February 5 th; this demand was not met, and thus the workers downed tools. With the government unable to pay bills, workers have consequently not been paid.
The crisis has come about as Honduras struggles with bankruptcy on the back of increased debt servicing costs, high levels of corruption and failures to reign in fiscal expenditure during an election year. The construction sector is one of just a number of sectors hit by the government's lack of solvency, including the armed services, teachers and basic public services. Against this backdrop the government had struggled to pass a budget which would enable politically unpalatable spending cuts. This has further prevented the government from distributing funds. The budget was partially passed in mid-January, however a number of institutions (including the National Electricity Company (ENEE), the National Port Company (ENP) and the National Autonomous Service of Aqueducts and Sewers (SANAA)) were not included as agreements could not be reached, indicating further liquidity concerns ahead. We see little hope for fiscal consolidation over the near term, primarily due to increased political pressure in the run up to the elections in November 2013 and are subsequently forecasting a budget deficit of 6% of GDP for 2013, far above the government's estimate of 3.5%.
|Living Beyond Its Means|
|Honduras Fiscal Budget|