Belize’s credit rating has fallen for a second time in 30 days. Moody’s Investors Service published its report yesterday, downgrading Belize from a B-3 score to CAA1 under the foreign currency category. According to Moody’s Service, Belize’s economy has undergone a tremendous shock due to the Covid-19 pandemic and has collapsed the country’s tourism industry. The report states, quote, “The rating agency believes that the sovereign’s liquidity and funding position will deteriorate to such an extent that the government is likely to request interest payment deferrals that will lead to moderate losses for investors.” End of quote.

Moody’s Investors Service also changed Belize’s stable outlook to negative. The country’s long-term foreign-currency bond ceiling was also changed to B2 from B1 and the foreign-currency deposit ceiling changed to Caa2 from Caa1. The short-term foreign-currency bond ceiling and the short-term foreign-currency bank deposit ceilings remain unchanged at Not Prime (NP) and the local-currency bond and deposit ceilings were changed to B2 from B1. Making reference to the country’s revenue and precautionary measures taken during the COVID-19 pandemic, the report stated, quote, “Tourism directly accounts for 14% of gross value added, while its indirect contribution has been measured as high as 40%.

Tourism receipts make up 42% of total exports of goods and services, highlighting the economy’s increased reliance on what has been a key growth sector that has sustained overall activity. As such, the closure of borders has halted the flow of visitors to Belize, damaging economic activity and export receipts. Moreover, the government has imposed other lockdown measures, including shuttering businesses and schools, restricting domestic transportation, and placing the western side of the country into a highly restrictive quarantine. Although these measures have so far been successful in containing the spread of the virus, the effect on economic activity has been severe.

Moody’s estimates that Belize’s real GDP could contract by as much as 15% in 2020, depending on the duration of the outbreak and on global financial conditions. By mid-April, the authorities report that 72,000 applications for unemployment benefits were received, accounting for over 28% of the entire country’s labor force. This would be the first time the economy would record a full-year contraction since at least 1995. Although Moody’s expects a more favorable performance in 2021 with real GDP expanding by 8.1%, the rebound in economic activity will be driven entirely by a favorable base effect.” End of quote.

Moody’s goes on to state that Belize showcases a stable political environment, underpinned by a general consensus around key policy issues. The government’s small size limits policy implementation, as does the large size of the informal economy, which Moody’s has considered into its assessment of institutions and governance strength.

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