Belize’s economic history shows marked periods of growth accelerations and recessions. There have been two such expansions and collapses in the past two decades, with disturbingly similar features. While not always initiated by public spending, these booms quickly became public-investment led, until ballooning budget, trade, and current account deficits and the resulting shrinking reserves and growing debt required home-grown adjustment programs. The huge cuts in public investment and sharp increases in reserve requirements created marked recessions. In addition, the second acceleration happened after a significant collapse in private savings, and ended up creating a huge debt overhang which has eliminated public savings. As a consequence, Belize is a country with a low savings, little access to international finance, and an extremely high domestic cost of finance. Access to finance is the binding constraint to economic growth.
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