IMF Report on macroeconomic state of Belize

The International Monetary Fund (IMF) has produced its latest report on Belize after consultations in August. It's a mix of good and bad news. The good, according to a summary of the report, is essentially that the macroeconomic outlook for 2011 remains moderately positive. Output growth is projected at two point five percent, reflecting a strong performance in the first quarter-supported by an expansion in manufacturing and electricity sectors, and a modest recovery in overnight tourist arrivals. Foreign reserves are healthy but the high deficit is projected to remain at about three percent of GDP in the context of some improvement in the terms of trade. The public debt, accrued by the Government, went up slightly from eighty-two to eighty-three percent of GDP for 2010.

The bad is that there is a weak investment climate and concern for the rise in poverty which another recent report put at forty percent. Higher food and fuel prices are expected to push inflation slightly upward. The IMF team projects that there are challenges associated with the uncertain global environment, vulnerabilities in the banking system and rising gross financing needs of the public sector. There are also concerns about non-performing loans in the banking system and that bank prudential indicators have remained weak. Against this backdrop, the IMF encouraged the authorities to strengthen the policy framework and advance the reform agenda and programs to reduce poverty. The business climate must also be strengthened to tackle Belize's low productivity growth. It recommends a reduction in tax concessions, with improvement in overall tax collections and a containment of the wage bill as well as a streamlining of capital spending. The IMF also calls for timely compensation to former owners of nationalized entities, such as Telemedia and B.E.L., which are now entrenched in the constitution. As to stability in the financial sector, the IMF says that should be a high priority.

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