The International Monetary Fund (IMF) has recently released its initial report on Belize’s economy. The report describes the preliminary findings following a staff visit to Belize between September 23 and October 4. Meetings during this time were held with Prime Minister Dean Barrow, Governor of Central Bank Joy Grant, and Financial Secretary Joseph Waight. The team, led by Daniel Leigh, met with other senior government officials, representatives of the opposition, private sector, and public sector unions. Missions are undertaken as part of regular consultations under Article IV of the IMF’s Articles of Agreement, in the context of a request to use IMF resources.
In its initial findings, the report says that while economic recovery is in progress, the pace is slow, “Belize’s economic recovery continues, but the pace is slowing”. According to the report, “real GDP grew by 3.2% in 2018 and by an estimated 4% in 2019.” There have been several instances of economic activity and growth but the report shows that “recent data indicate a slowdown in economic activity, with a minor contraction in 2019, reflecting a severe drought.” The primary fiscal surplus reached 2.1% of GDP in the 2018/2019 fiscal year, a 4% rise in GDP from two years prior. The IMF report indicates heightened spending on wages and public investment and weaker revenue than expected, putting the 2019 budget’s target at risk.
The report also detailed a range of risks. According to the report, “the medium-term outlook remains challenging.” While real GDP growth is projected at just below 2% over the medium term, in line with recent trends, the current account deficit is projected to remain large, reflecting structural weaknesses, with international reserves projected at about three months of imports of goods and services over the medium term. As such, a primary fiscal surplus that is larger than targeted in the 2019/2020 budget is needed to reduce public debt from its end-2018 level (94% of GDP) to prudent levels over the long term and build buffers against shocks. The report also details that downside risks remain substantial, with weaker US growth. That in turn reflects an “impact on tourism; higher oil prices; and natural disasters to which Belize remains highly vulnerable.” It also goes on to say that elevated rates of crime in the country pose risks to growth and competitiveness. Additionally, it is assumed that Belize’s inclusion on the European Union (EU) list of non-cooperative tax jurisdictions, and uncertainty regarding standard setters’ expectations, could disrupt investment and trade flows. However, “on the upside, an intensification of structural reforms could further raise investment, income, and employment.”
In an effort to reinforce Belize’s economic growth and improving the business environment, recommendations have been made. For example, a reform on priority areas include: facilitating access to credit by establishing a credit bureau and collateral registry; streamlining regulations for starting a business; expanding technical and vocational training programs; fighting corruption by implementing and enforcing the asset declaration regime through the Integrity Commission and strengthening the rules on conflict of interest; and ensuring public safety, including through community programs that steer youth toward formal employment and away from crime. It is also suggested that Belize continue to make substantial investments into climate-resilient infrastructure, guided by the National Climate Resilience Investment Plan. Costing and prioritizing projects and designing financing strategies with development partners is a priority. Stronger implementation of building codes and land use regulations would further reduce Belize’s vulnerability to weather shocks. Belize needs more self-insurance through a natural disaster fund; ex-ante contingent lines of credit; and optimized participation in regional insurance options.
Of note is that the IMF cited Belize’s unemployment rate which stands at 7.6% which the institution calls “historic”. It also points to inflation rates which are at near zero. The IMF also calls for government to ‘increase awareness of Belize’s flagship targeted social protection programs… and amplifying support for them, are warranted.” These programs are the BOOST, Conditional Cash Transfer and Pantry Programs.
