The Belize Economy has traditionally been dependent on one crop or product going back more than 200 years, when it was dependent first on logwood and then on mahogany. Since that time we have come a long way in diversifying our economy. While forestry does continue on a limited scale, the Belize economy now produces and exports sugar, citrus, bananas, seafood as well as smaller exports of papayas and farmed shrimp. More recent additions to our economic diversity include a well-established tourism industry that offers a wealth of opportunities for visitors and potential investors alike. All of this has contributed significantly to our growing population providing our people with sustainable employment.
The Belize Economy has grown significantly from 2011 – 2012. According the Statistical Institute of Belize (SIB), the economy grew at a rate of 5.3% as compared to the 1.9% rate during 2011. This was achieved mainly through growth in the value of sugar, citrus concentrate, bananas, and farmed shrimp in the agriculture sector. Growth was also experienced in overnight tourism, construction, and telecommunications. This increase in economic activity was enough to offset a sharp decline in the value of oil production, electricity generation and a decrease in cruise ship visitors. This also included Corozal Free Zone exports. In 2012, merchandise exports from Belize amounted to BZ$1,250.2 million as compared to BZ$1,207.2 million in 2011.
Sugar exports increased to $107.6 million in 2012 up from $82.7 million in 2011. Citrus concentrate exports increased to $143.0 million in 2012 compared to $103.1 million in 2011. Farmed shrimp exports increased to $28.4 million in 2012 up from $20.9 million in 2011. Among the more recent agricultural exports Red Kidney Bean exports increased to $7.7 million in 2012 up from $5.3 million in 2011.
More recently Belize has added an entirely new industry with the discovery of oil. Exploration is ongoing to add new fields to our small oil exports. In 2012, crude petroleum exports declined in value to $186.3 million. This was a sharp decrease from $292.1 million in 2011. Oil output had fallen from 1,513,700 barrels in 2010 to 1,406,534 barrels in 2011 and to a new low of 1,029,938 barrels in 2012. However, oil has contributed a lot to the Belize economy.
Belize also offers a combination of ancient past and Caribbean Sea. We offer a unique combination of Mayan sites and fine beaches against a backdrop of diverse flora and fauna. These wonders has attracted many tourists to the country thus contributing to the Belize economy. During 2012, tourism inflows were US$261.7 million (SIB preliminary estimate) compared to US$247.6 million in 2011. Overall tourist arrivals experienced a slight decrease from 888,000 during 2011 to 833,700 visitors during 2012, a 6.11% decrease. The overnight category increased from 233,200 visitors in 2011 to 257,000 visitors in 2012. Cruise ship passenger decreased from 654,800 arrivals in 2011 to 576,700 arrivals in 2012. This places renewed importance on the significance of the overnight tourist market compared to cruise ship arrivals. While overall tourism arrivals is important, it should be noted that overnight visitors make the strongest contribution to the Belize economy with one (1) overnight visitor contributing approximately 15.7 times as much as one (1) cruise ship passenger.
The Belize Economy also needs to take into account its Labor Force. On a survey carried out by the Statistical Institute of Belize in September 2012, statistics showed an unemployment rate of 16.1%, compared to 23.1% in 2011. Unemployment however is decreasing but it continues to be a challenge within the Belize economy.
Monetary and Fiscal Policy
One of the main focuses of the Government of Belize during 2012 was the need to exercise prudent financial management in the face of US$1,017.8 million of foreign debt. More than half this debt was the Super Bond which was the subject of renegotiation efforts. Including domestic public debt of BZ$417.2 million, the total public debt stood at BZ$2,452.8 million or 77.6% of GDP. The challenge for GOB continues to be in reducing any budget deficit while meeting the development needs of the nation therefore bringing the foreign debt down to a more manageable level.
Monetary policy reserve requirements, which are the main instruments used by the Central Bank of Belize (CBB), did not reflect further changes from the directive to reduce the minimum interest rate on deposits to 2.5% effective October 1, 2011. This followed from an earlier change made when the CBB reduced the minimum interest rate on deposits from 4.5% to 3.5% on November 1, 2010. This remains a part of Government policy aimed at also lowering certificate of deposit rates and thus the average lending rates. The CBB cash reserve requirement remains the same at 8.5%. The CBB removed their May 1, 2010 directive that the commercial banks hold a minimum of 6.5% of their average deposit liabilities in treasury bills. This was reduced to 5% in January 2011 and to 3 % in April 2011 and to 0% on October 1, 2011. This was in response to a sustained increase in commercial bank demand for Government securities. The CBB May 1, 2010 directive had been the first major change seen since September 2006 when the reserve requirements were established and set at 10% primary and 23% secondary reserve requirements.
An important change introduced by the Central Bank of Belize effective December 1, 2011 was revised regulations (BFIA Circulars) governing the manner in which loans are classified and how loan loss provisions are to be allocated for each classified loan.
Some major features of the changes made under the Banks and Financial Institutions Act (BFIA) include:
- Overdraft classification is now being defined by the customer’s cash flow being able to cover monthly interest due and ability to operate the facility within the approved limits.
- Banks are now required to make specific provisions for classified facilities in spite of the fact that such facilities are secured by tangible assets.
- Loans classified as ‘loss” that are fully collateralized by marketable security require specific reserves equivalent to fifty percent (50%) of the outstanding loan balance.
The exchange rate within the Belize economy remains in place at BZ$2.00 to US$1.00. Gross international reserves reached US$288.9 million or 4.6 months of imports compared to US$236.1 million, or 4.3 months of imports in 2011. This has shown improvement over the reserves of US$218.0 million in 2009.
As a democracy with a well-established English Common Law legal system the Belize economy is stable and welcomes visitors and investors to come and share in our growing economy that achieved growth of 5.3% together with a low inflation rate of 1.3% in 2012.
Senior Risk Analyst
Atlantic Bank Ltd.