IMF Provides Initial Report on Belize’s Economic Performance - 10/09/19 11:33 AM
The latest IMF report, though in preliminary stages, says that while economic recovery is underway, the pace is slowing. It reports heightened spending on wages and public investment and weaker revenue than expected, putting the 2019 budget’s target at risk. As to the macroeconomic outlook; the news is bleak. Elevated public debt is as high as one hundred percent of G.D.P., even as Belize faces external risks from a host of issues such as black listing. News Five’s Isani Cayetano.
Isani Cayetano, Reporting
The International Monetary Fund has released a report describing initial findings following an official staff visit to Belize between September twenty-third and October fourth. Led by Deputy Division Chief Daniel Leigh, from the Western Hemisphere Department of the IMF, meetings were held with Prime Minister Dean Barrow, Central Bank Governor Joy Grant and Financial Secretary Joseph Waight, among other representatives of government, as well as the public and private sectors.
The preliminary results indicate that Belize’s economic recovery maintains a slow pace, a fact highlighted in PM Barrow’s Independence Day address.
Prime Minister Dean Barrow [File: September 21st, 2019]
“Belize’s economic performance in the first quarter of this year has been spectacular. GDP grew in the three months from January through March, by an unusual 5.2 percent. And the even better accompanying news was that the unemployment rate fell to a historic low of 7.6 percent. Admittedly, second quarter GDP greatly lagged the first quarter and an actual decline of 0.8 percent was recorded. But when the two quarters are put together, in aggregate we are still much ahead of par and much ahead of our peers in the region.”
While the prime minister touted double-digit growth in tourism arrivals in 2018, pointing to marketing initiatives, more flights from major cities and strong trade relations, recent data from the Statistical Institute of Belize indicate a decline in economic activity.
“Growth and development, however, have always been recognized as two different things. One does not necessarily include the other and in fact they can sometimes sharply diverge. When Belize therefore experiences a happy confluence of growth and development proceeding in tandem; of increased GDP resulting in increased jobs; of more people being put to work and being lifted out of poverty, it is indeed a conjuncture of which we can be proud.”
Despite carrying out significant fiscal consolidation since 2017, the rate of adjustment has slowed to a snail’s pace. The approved budget for the financial year 2019/2020 focused on a primary fiscal surplus of a little over two percent of the gross domestic product, however, the latest figures show increased expenditure in wages and public investment. The result has been weaker revenue than what was anticipated, placing the target of the financial plan in jeopardy.
John Briceño, Leader of the Opposition
“The result of all this is a people wary from worry, worry about their personal safety, worry about their economic security, about poverty and deprivation, worry about an uncertain future and more so, worried about the kind of nation we are building for our children. How could they not feel this way when our poor, instead of being lifted up, are being dragged into greater poverty due to an all but stagnant economy? How could they not feel this way when our middle class is shrinking and collapsing under burdensome taxes and the lack of vision by their government?”
To reduce public debt from where it stood one year ago, a primary fiscal surplus that is greater than what was intended in the 2019/2020 budget is necessary in order to achieve practical levels over the long term so as to safeguard against shocks. External risks, nonetheless, are ever present. Belize’s inclusion on the European Union list of non-cooperative tax jurisdictions could disrupt investment and trade flows.
“We have been trying to work with the European Union to in fact produce the legislation that they require in a form acceptable to them because that is what is necessary in order to get us removed from the blacklist. It is time sensitive. Their next meeting is being held just after, I think, the middle of this month and that is why we would wish to pass the required legislation in the case of the house today and hopefully the legislation can also get through the senate next week so that we would then be able to offer proof of the assent by His Excellence the Governor General to the European Union.”
That piece of legislation goes before the upper house on Wednesday. The IMF Executive Board meets in November to discuss Belize’s Article IV consultation.