Economic Analysis
Belize

Belize

Population 0.4 million
GDP per capita 4,498 $USD
D
Country risk assessment
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Business Climate
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Synthesis

Major Economic Indicators

  2018 2019 2020 (e) 2021 (f)
GDP growth (%) 2.1 -2.0 -16.0 5.0
Inflation (yearly average, %) -0.1 0.2 1.1 1.3
Budget balance (% GDP) -1.9 -4.0 -9.8 -8.2
Current account balance (% GDP) -8.6 -8.1 -15.3 -11.4
Public debt (% GDP)* 101.5 105.1 134.6 137.0

(e): Estimate (f): Forecast *Including grants, fiscal year from April 2020 to March 2021

STRENGTHS

  • Tourism potential
  • Highly competitive tourism industry compared to regional peers
  • Support from international lenders

WEAKNESSES

  • Poor fiscal health
  • Undiversified exports
  • Underdeveloped manufacturing sector
  • Agricultural sector exposed to climatic events
  • Criminality

Risk assessment

Hurt by the fall in tourism and at the mercy of weather conditions

Belize, which is largely dependent on tourism, was the region’s hardest-hit country during the 2020 recession and will start 2021 on the back foot. With the pandemic taking off again in the United States and Europe at the end of 2020, and given the scale of the economic recession in these countries, it is unlikely that there will be a real pick-up in tourism and cruises from these countries, which are the main sources of visitors to Belize. The tourism sector (40% of GDP) will therefore continue to suffer, which will keep unemployment high. A full 20.9% of the workforce had applied for unemployment assistance by autumn 2020. Simultaneously, agriculture, the second-most important sector in the country's economy (11% of GDP), is also likely to struggle. After a major drought in 2019 triggered a recession, flooding caused by hurricanes Eta and Iota in November 2020 destroyed part of Belize’s vegetable, rice and sugar production. Weakness in these two sectors, which are mainstays of the country's exports of goods and services, will be amplified by the moderate recovery in external demand. Recent developments in the two sectors will also have an unfavourable effect on their attractiveness to foreign investment, whereas previously they were the main targets for investors in the country. The overall level of investment in the country is expected to suffer as a result. Domestic demand will therefore be mainly driven by household consumption (82% of GDP in 2019), supported by low inflation and the reopening of the economy, in the absence of new measures to fight the pandemic. The central bank’s expansionary policy of supporting credit by lowering bank reserve requirements should likewise boost consumption. Public demand is expected to remain largely constrained by the government's financing difficulties, despite some reconstruction projects following the hurricanes in autumn 2020, financed by international aid. In particular, Taiwan has pledged USD 100,000 to help with reconstruction.

 

Risk of further public debt restructuring and a fragile current account

The pandemic and efforts to fight its health and economic impacts caused the trend towards consolidation of public finances, which began in 2018, to go into reverse. The public deficit exploded in 2020 and is expected to be only marginally reduced in 2021, with a continuing significant shortfall in tax revenues linked to the recovering tourism sector. Expenditure is not expected to decrease under the new prime minister's recovery plan, which is centred on financing infrastructure and helping the poorest segments of the population. A significant share of the financing should therefore come from international and multilateral donors and the domestic market, as any other type of external financing would be prohibitively expensive. External public debt amounted to 90% of GDP in August 2020, but this share is expected to decrease with greater recourse to the domestic market. In August 2020, the government successfully applied to capitalise interest payments coming due through to February 2021 for dollar bonds maturing in 2034. However, this measure is expected to be largely insufficient, leaving the door open for broader restructuring, which would be the fourth in 13 years.

Beyond these budgetary constraints, the country also has to contend with severe external imbalances, linked to the large goods deficit, which is equivalent to 20% of GDP. The deficit is mainly due to the weak manufacturing sector and the fall in domestic oil production in the absence of discoveries of new reserves. Agricultural exports (cane sugar, citrus fruits, bananas, vegetables) are not expected to compensate, due to the impact of weather conditions. The services surplus, which will remain small due to the poor health of global tourism and expatriate remittances (5% of GDP in 2019), will be unable to make up for this deficit and the income deficit. The current account will therefore remain largely in deficit. This deficit will not be entirely covered by sluggish foreign direct investment, which will increase the pressure on foreign exchange reserves (4.5 months of imports at the end of August 2020) and the Belizean dollar’s U.S. dollar peg.

 

End of an era: the opposition takes power after 12 years

After three consecutive terms under the leadership of Dean Barrow, the United Democratic Party was defeated in the November 2020 elections by the opposition People's United Party, after Dean Barrow announced his retirement from politics. The new leader of the Democratic Party, Patrick Faber, was unable to win over voters who turned out in huge numbers at the polls (80% turnout) following a slew of corruption cases in early 2020. John Antonio Briceno was appointed prime minister, vowing to fight corruption and revive agriculture and tourism. Combating drug trafficking and improving the business climate will also remain priorities for the new government.

In terms of international affairs, the main issue remains the border dispute with Guatemala, which claims half of Belize's territory. In May 2019, 55% of Belizeans voted in favour of using the International Court of Justice (ICJ) to settle the dispute, following Guatemala's approval of such a settlement in a referendum in 2018.

 

Last updated: February 2021

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