Belize

Major Economic Indicators

(e): Estimate (f): Forecast *Including grants,  Fiscal year from April 1st to March 31st. 2023 data 2023/24

Risk assessment

The economic recovery continues

With most COVID-related restrictions lifted, such as borders and airports closures, the economy should stay on the road to recovery in 2022,  driven by private consumption, robust tourist arrivals amid completed vaccination in originating countries, and a rebound in exports. Private consumption (63% of GDP) will slightly increase as the last pandemic-related restrictions are lifted in line with the vaccine rollout (around 50% of the population had been fully vaccinated by November 2021) . The unemployment rate is supposed to fall from over 11% in 2021 to roughly 9%   in 2022 thanks to the gradual economic recovery. The    temporary unemployment program and Boost plan (conditional cash transfers) will continue. Conversely, government consumption (20% of GDP) might weigh on growth as fiscal consolidation takes hold. With the country sheltering the world’s second-largest barrier reef and travel restrictions removed, tourism is expected to continue its recovery in 2022. As weather conditions and agricultural practices improve, a moderate increase in banana, cattle and poultry production is expected, which will help exports. Sugarcane, shrimp and conch deliveries should also slightly grow due to international demand. Fixed investment (22% of GDP)  should be minored due to lower government capital expenditures. As agribusiness companies (American Sugar Refining, Green Tropics) have already made substantial investments, we expect to see additional investment in other low-tech sectors  . The tourism sector might attract finances as international travel resumes. However, the opening of borders represent a health hazard for a country that is still only partially vaccinated. 

Public debt restructuring and twin deficits

Although still in deficit, the public balance is expected to improve in 2022. Tax collection will increase, as the economy is recovering, and we expect wage cuts as well as reductions in cash transfers and capital expenditure according to the budget for fiscal year 2021/22 . In April 2020, the authorities said they wanted to restructure their unique so-called 2034 USD 560 million Super bond. In August, they ceased serving the interests. In November, they reached an agreement with most holders, who were facing a permanent default. Belize bought back the Super bond at 55 cents on the dollar thanks to the USD 364 million financing arranged by The Nature Conservancy, a U.S. conservation charity and backed by the proceeds of a “blue bond” arranged by Credit Suisse. The bond is called ”blue” because Belize has pledged to invest a big share of the savings in maritime conservation, with, for instance, the objective to protect 30% of its waters by 2026. Even though the restructuring should substantially improve fiscal sustainability, public debt might continue to weigh on fiscal accounts, as it already contains a substantial part of external debt (around 83.2% of GDP   in August 2021). Its dynamic will remain vulnerable to potential shocks on interest rates and the fiscal position might influence it . Besides its public deficit, Belize also has to cope with its external imbalances, due to its large trade deficit, which accounts for 23% of GDP. Although improving, export earnings will remain outbalanced by imports, which will rise faster as domestic demand is recovering and the oil bill is surging. The services account surplus   might see some improvements, as tourism is expected to show more dynamism. The income account will remain in deficit, with debt service resuming, and as transfers from foreign companies operating in Belize will increase more than remittances from expatriate workers. The current account deficit might not be covered by foreign direct investment, donations and multilateral financing, putting pressure on international reserves (expected to remain under 5 months of imports in 2022), but not endangering the peg to the dollar. 

Slight improvement in the socio-political climate

The legislative election of November 2020 put an end to a 12-year era in power of the centre-right United Democratic Party (UDP). The prime minister John Antonio Briceño, the centre-left People’s United Party (PUP) leader, is serving a five-year mandate. The PUP has the legislative majority - 26 in the 31-seat House of Representatives (lower house),  which is strengthening political stability. Meanwhile, at the local government level, the UDP enjoys some support in spite of its weak legislative position. For 2022, we expect a peaceful political climate with an improvement in institutional and tax reforms, but which might be tempered by some social discontent due to the fiscal consolidation. Combating drug trafficking and related criminality, improving the business environment, and building resilience to climate change will also remain priorities for the government. Tensions between Belize and neighbouring Guatemala will continue in 2022 as the International Court of Justice (ICJ) decision over border disputes might take quite some time, possibly in 2024.

Last updated: February 2022