Analysis of the cost of remittances and its impact on Honduras’GDP: Forecasts for 2024 and 2025

Abstract

This research exposes, from a micro and macro econometric perspective, the impacts of the costs of remittances of US$200 and US$500 sent to Honduras from Spain and the United States on the national Gross Domestic Product (GDP) for the years 2024 and 2025. To make forecasts of the effects of remittance costs on the Honduran economy, quarterly data were collected from 2013 to 2023 and an ARIMA (Autoregressive Integrated Moving Average) model was constructed in conjunction with a linear regression to determine the relationship of remittance costs and Honduran GDP in the short and long term. The study identified the companies most used by Honduran remitters abroad and their respective average costs, whose increases are positively correlated with Honduran GDP. The results of the statistical modeling indicate that Honduras will lose $467 million in remittance costs of $200 and $500 from the Spanish and U.S. corridor in 2024, and $498 million by 2025. This shows that Honduras, on average, could have at least 1.3% higher GDP by 2024 and 2025 if sending these remittances were free.