Belize is projected to record economic growth of 12.5 per cent in 2021 and 6.5 per cent in 2022, led by a rebound of activity in the construction, retail and wholesale trade, transport and communication, and tourism sectors.

This projection was articulated by the International Monetary Fund (IMF) team led by Jaime Guajardo, which conducted discussions for the 2022 Article IV consultation with Belize between February 10 and 22. The IMF pointed out that the unemployment rate also declined from 13.7 per cent in the second half of 2020 to 9.2 per cent in the second half of 2021.

End of year inflation rose to 4.9 per cent in 2021 but is projected to moderate to 3.5 per cent in 2022 and two per cent over the medium term as commodity prices stabilise. The primary fiscal balance is projected to increase from –8.5 per cent of gross domestic product (GDP) in FY2020 to 1.5 per cent of GDP in FY2021.

This will be driven by a rise in revenues, a fall in current expenditure due to the consolidation measures implemented in FY2021, and lower capital expenditure. Going forward, the primary surplus is projected to stabilize at 0.7% of GDP assuming that the fiscal savings achieved in FY2021 are preserved over time and no additional measures are implemented during FY2022-32.

Public debt declined from 133 per cent of GDP in 2020 to 108 per cent in 2021 and is projected to decline further to 84 per cent of GDP by 2032 due to the continued primary surpluses.

71% fall in tourist arrivals

The COVID-19 pandemic has had a severe impact on Belize. This was evidenced by a 71 per cent fall in tourist arrivals and a 16.7 per cent contraction in real GDP in 2020. The resulting fall in fiscal revenues and rise in pandemic-related expenditure widened the fiscal deficit and increased public debt to 133 per cent of GDP in 2020, a level that was assessed as unsustainable in the 2021 Article IV consultation.

To address this situation, the government presented a Medium-Term Recovery Plan (MTRP) in April 2021, which seeks to reduce public debt to 85 per cent of GDP in 2025 and 70 per cent in 2030 through the implementation of fiscal consolidation, growth-enhancing structural reforms, and debt restructuring.

However, there was significant progress towards restoring debt sustainability was made in 2021, In line with the MTRP, the FY2021 budget introduced sizable fiscal consolidation measures, including cuts to public sector wages and purchases of goods and services, which are projected to reduce government expenditure by 3.4 per cent of GDP in FY2021.

Belize also completed a debt for marine protection swap, under which a subsidiary of The Nature Conservancy lent funds to Belize to buy back the super bond (totalling US$553 million or 30 per cent of GDP) at a discounted price of 55 cents per dollar. In exchange, Belize committed to increase expenditure on marine conservation until 2041 and expand its Biodiversity Protection Zones (coral reefs, mangroves, and fish spawning sites) from 16 per cent of ocean area to 30 per cent by 2026.

This operation reduced Belize’s public debt by 12 per cent of GDP in 2021.

External position strengthened in 2021

The external position strengthened in 2021 but is projected to weaken over the medium term. International reserves increased from US$348 million (3.8 months of imports) in 2020 to US$420 million (3.9 months of imports) in 2021, partly due to the IMF’s SDR25.6 million allocation, which the authorities are keeping as reserves.

Going forward, external financing is expected to become scarcer due to debt sustainability concerns, which would worsen reserve adequacy over time.