IMF Working Papers

The small developing states (SDS) have unique economic characteristics and face specific constraints that shape their economic performance. We study a set of key challenges facing SDS using the case of Belize. The empirical analysis centers on (i) improving access to finance; (ii) exploring drivers of labor force participation with a view to increasing the labor force contribution to growth; and (iii) assessing the tourism sector’s capacity constraints, and arrives at the following findings. First, it shows that both demand and supply factors contribute to constraining private sector credit, primarily via the level of lending rates, complex collateral processes, legacy of high NPLs, and extent of regulatory capital above the regulatory minimum. Second, it delves into the relevance of tourism’s share in the services sector, youth’s educational attainment, disparity in labor market outcomes, and availability of childcare for explaining heterogeneity of labor force participation gaps between men and women. Third, it zooms into the critical role of hotel capacity, flight availability, and cost competitiveness in shaping the tourism sector’s prospects.