WASHINGTON, DC – The International Monetary Fund (IMF) says economic activity in Belize has rebounded strongly from the COVID-19 pandemic after contracting by 13.4 percent in 2020.
The IMF said that real gross domestic product (GDP)had expanded by 15.2 percent in 2021 and 12.1 percent last year, led by retail and wholesale trade, tourism, and business process outsourcing.
The Washington-based financial institution said the real GDP growth is projected to slow to 2.4 percent in 2023 and two percent over the medium term as tourism returns to pre-pandemic levels.
It said inflation increased from near zero in 2020 to 3.2 percent in 2021 and 6.3 percent in 2022, led by higher global energy and food prices despite measures to fix domestic diesel and regular gasoline prices at the pump since April 2022.
“Inflation is projected to fall to 4.1 percent in 2023 and 1.2 percent over the medium term, in line with the projected fall in commodity prices and global inflation. Risks to the outlook remain tilted to the downside, including a sharp global slowdown, further increases in commodity prices, and climate-related disasters.”
The IMF said that the fiscal position has strengthened significantly. Public debt declined from 101 percent of GDP in 2020 to 64 percent of GDP in 2022, driven by the debt for marine protection swap with The Nature Conservancy (TNC), a significant reduction in the fiscal deficit helped by expenditure restraint, strong growth, high inflation, and a discount in the Petrocaribe debt owed to Venezuela.
The primary balance rose from a minus 8.1 percent of GDP in financial year 2020 to 1.2 percent of GDP in financial year 2022 due to expenditure containment, including a temporary 10 percent cut in public sector wages and the suspension of wage increments in the fiscal year 2021-22, and a strong recovery of revenue.
The IMF said that in an unchanged policies scenario, the primary balance is projected to remain at 1.2 percent of GDP over the medium term, with public debt declining to 53 percent of GDP by 2028.
Public debt is assessed as sustainable over the medium term, although with still high near-term risks, it said.
The IMF executive board, which carried out an Article IV consultation with Belize, said it agreed with the thrust of the staff appraisal, welcoming the strong recovery in economic activity and the sharp reduction in public debt over the last two years.
They highlighted that growth and inflation are projected to moderate and risks are to the downside, including from a sharp slowdown in advanced economies, further increases in commodity prices, and climate related disasters. The executive board underscored the importance of reforms to address constraints to long term growth and enhance resilience to shocks.
The IMF directors encouraged continued fiscal consolidation to further reduce public debt and ensure adequate buffers to respond to adverse shocks.
They called for measures to enhance revenues and reprioritize expenditures, while increasing priority spending on infrastructure, targeted social programs, and crime prevention. Important measures include expanding the tax base, strengthening revenue administration, and pension reform.
Noting the need to further improve public financial management, the directors recommended strengthening multiyear budget preparations, fiscal risk assessment, and public investment management.
A few directors saw merit in adopting a Fiscal Responsibility Law to enhance credibility of the fiscal framework.
The directors underscored that efforts to enhance growth should center on structural reforms to ease access to credit for micro, small, and medium sized enterprises, enhance governance, and build resilience to climate change and related disasters.
They highlighted that adopting a Disaster Resilience Strategy, based on a consistent multi-year macro-fiscal framework, could help to unlock multilateral and donor funding to support these efforts.
