Country Report Belize July 2009

Outlook for 2009-10

The prime minister, Dean Barrow of the United Democratic Party (UDP), holds a strong parliamentary majority, but in the context of a deteriorating economic environment, Mr Barrow will struggle to fulfil election campaign promises. Pressure on the public finances from the high level of public sector debt will continue to limit the government's fiscal room for manoeuvre and its ability to maintain political and economic stability. None the less, Mr Barrow's popularity is expected to endure, owing to strong public support for reforms. The Economist Intelligence Unit expects the government to maintain a broadly orthodox economic policy stance and benefit from concessional finance for capital spending and anti-poverty measures. Following an expansion of 3% in 2008, economic growth will contract in 2009 before recovering gradually in 2010, owing to a weaker global economy, lower commodity prices, slumping tourist arrivals and a decline in foreign direct investment (FDI).

The political scene

A former prime minister has been cleared of theft charges by the Supreme Court. On June 9th 2009 the Supreme Court ruled that Said Musa (1998-2008) should not stand trial for allegedly mishandling US$10m in grant money from Venezuela.

Economic policy

Despite the deteriorating fiscal position, the government has indicated that it will not raise the general sales tax (GST) in the 2010/11 financial year as advised by the IMF. However, it has shown its willingness to implement unpopular policy measures to help sustain the fiscal accounts by raising petrol prices several times in recent months.

The domestic economy

Real GDP contracted by 2.2% in the first quarter of 2009 as a result of both domestic and external factors. Slowing domestic demand led to a 14% year-on-year contraction in the wholesale and retail trade category, while the global recession depressed tourism demand. As a result of rapid private sector credit growth in recent years and deteriorating economic conditions, the commercial bank credit portfolio has deteriorated markedly.

Foreign trade and payments

Import spending contracted sharply (down by 17.9% year on year) as a result of slowing domestic demand. As a result, the trade deficit narrowed by 19.3% year on year, to US$197.2m.

This report covers the following industry codes:
SIC Code: 70;1;60
NAICS Code: 72;11;52

• Summary
• Basic data
• Political structure
• Economic structure: Annual indicators
• Economic structure: Quarterly indicators
• Outlook for 2009-10: Domestic politics
• Outlook for 2009-10: International relations
• Outlook for 2009-10: Policy trends
• Outlook for 2009-10: Economic growth
• The political scene: Former prime minister is cleared of theft charges
• The political scene: Future of BTL remains unclear following court battles
• The political scene: Crime levels rise again, despite efforts to strengthen policing
• Economic policy: Government vows not to raise sales tax
• Economic policy: Higher petrol prices to boost revenue collection
• Economic policy: Commercial ties strengthened with Taiwan and Mexico
• The domestic economy: Real GDP contracted in the first quarter
• The domestic economy: Inflation has eased markedly
• The domestic economy: Level of bad debt doubled in 2008
• Foreign trade and payments: Falling import spending results in smaller trade deficit
• The region: Summary
• Outlook for 2009-10: Broad political stability will be maintained
• Outlook for 2009-10: Regional integration will advance slowly
• Outlook for 2009-10: Economic downturn will impact public finances
• Outlook for 2009-10: The tourism sector will be hit by the global downturn
• Outlook for 2009-10: Tighter global liquidity threatens resource investments
• Outlook for 2009-10: The outlook for agriculture is mixed
• Outlook for 2009-10: Financial-sector performance will vary across the region
• Outlook for 2009-10: Crime will remain a major security concern
• Recent developments: Frustration rising over lack of response to crisis
• Recent developments: CRNM to be absorbed into Caricom secretariat
• Recent developments: Caribbean countries seek assistance from IMF
• Recent developments: Tourist arrivals decline sharply as global recession bites