Press Release No. 15/340

Press Release: IMF Staff Completes 2015 Article IV Mission to Belize

July 17, 2015

An International Monetary Fund (IMF) team led by Jacques Bouhga-Hagbe visited Belize during July 6-17 to hold discussions in the context of the country’s 2015 Article IV Consultation. At the conclusion of the visit, Mr. Bouhga-Hagbe issued the following statement:

“Growth accelerated to 3.6 percent in 2014 from 1.5 percent in 2013 on the back of a rebound in agriculture, and strong performances in tourism, electricity, construction and services. The fall in international oil and food prices has pushed down headline inflation to -0.2 (y/y) percent as of December 2014. Despite strong tourism receipts, falling exports, particularly of crude petroleum, and relatively strong imports widened the external current account deficit to 7.6 percent of GDP in 2014, up from 4.4 percent of GDP in 2013. Nevertheless, PetroCaribe and other official disbursements continued to finance the current account deficit and help build international reserves (equivalent to 5 months of imports at end-December 2014). The fiscal primary deficit increased to 1.5 percent of GDP in FY2014/15 (April–March), up from a deficit of 0.2 percent of GDP in FY2013/14. Although revenue collection remained in line with budget targets, spending continued to grow well above budget targets, driven by Petrocaribe-financed spending. Private credit growth reached 4.7 percent in 2014, supported by strong real estate credit and loans to the sugar sector. The banking system continued to strengthen. The impact of the loss of correspondent banking relations by some banks has been limited so far.

“In the mission’s view, the short-to-medium term outlook would remain broadly in line with the assessment made during the 2014 Article IV Consultation, with real GDP growth expected to fluctuate around 2.5 percent a year. Inflation would remain subdued. The fiscal primary balance would remain in deficit because of expansionary fiscal policies—including wage increases and new projects financed with PetroCaribe resources. Public debt would rise significantly, especially if a court decision calls for the payment of compensation to the former owners of the recently nationalized companies.

“The mission noted that significant downside risks to the economic outlook deserve close monitoring, including a protracted period of weak growth in advanced and emerging economies, complications with PetroCaribe financing, and the expected drop in sugar prices after the EU sugar reform takes full effect in 2017. On the upside, low international oil prices and growth-enhancing projects that are being implemented or envisaged could mitigate these risks.

“In this context, the mission stressed the benefits of a more ambitious fiscal stance that would create the policy buffers needed to help contain downside risks. Current efforts to strengthen the financial system should continue. Vigorous structural reforms, including greater flexibility in labor and other domestic markets, greater liberalization of the economy, simplification of procedures to start a new business and register property, and quicker resolution of contract disputes, would foster Belize’s competitiveness and raise GDP growth.

“The mission expresses its gratitude to the authorities for their openness, cooperation, assistance, and hospitality.”

During its visit, the IMF team met with Prime Minister Dean Barrow, Financial Secretary Joseph Waight, Central Bank Governor Glenford Ysaguirre, other government and central bank officials, representatives of the private sector, labor unions, sugar farmers and members of the opposition.