A publication from the Inter-American Development Bank (IDB)
Economic growth decelerated to 0.7 per cent in 2013, following strong growth of 4.0 per cent in 2012. Growth was dampened by lower output in agriculture, petroleum production and agro-based manufacturing. This was only partly offset by dynamic activity in tourism, construction and fisheries. Inflation (end of period) increased from 0.8 per cent in 2012 to 1.6 per cent in 2013, reflecting price increases in all categories of goods except clothing and footwear and miscellaneous goods and services. Average unemployment fell by 2.3 percentage points to 13 per cent, owing to vibrant growth in tourism, construction and other services.
The economy is projected to improve in 2014, with growth projected at between 2.0 per cent to 2.5 per cent. Pickup in activity is expected to be driven by continued strong growth in services, led mainly by tourism and construction and a modest recovery in agriculture. Stopover visitor arrivals are projected to increase by 5.0 per cent, reflecting improved performance in the main source markets, the United States and European Union. Construction will be buoyed by capital infrastructure projects, including major road improvement in Belize City and work on the Southern Highway and the Macal Bridge. Agriculture will recover based on a rebound in sugarcane and citrus output.
Fiscal challenges, which have been an area of signal difficulty for Belize, have eased with the restructuring of the Government’s external commercial debt in 2013. The restructuring, though not as generous as it could have been, has led to an extension of the bond by some nine years to 2038 at a lower interest rate. This, alongside significant loan inflows on the Venezuela Petrocaribe Agreement, (VPCA) have increased the fiscal space. Nevertheless, the Government needs to use this space prudently to retire more expensive debt and to focus on development projects that could increase longer-term growth to deflate the debt in the future.
Government finances deteriorated in 2013, with the overall fiscal deficit increasing from 0.8 per cent of GDP in 2012 to 1.1 per cent of GDP in 2013. Although revenues increased, this was outweighed by a growth in expenditure that was driven by higher spending on wages and salaries, goods and services and capital spending. There was sharp increase in the current account deficit from 1.0 per cent of GDP in 2012 to 4.5 per cent of GDP in 2013. The widening deficit was fuelled by an expansion in the merchandise trade deficit that exceeded the tourism-led improvement in the services account.
Economic activity slowed in the first quarter of 2014. All major export commodities, except marine products, registered declines in output, which offset dynamic growth in stopover tourism. Marine products were bolstered by higher shrimp production. Petroleum production contracted by 23 per cent to 169,952 barrels, owing to depleting reserves in the two fields. Sugarcane deliveries declined by 33.6 per cent and citrus (-29.9 per cent) and banana (-4.7 per cent) experienced lower production. Meanwhile, tourism maintained strong growth with stopover arrivals rising by 10.6 per cent and cruise passenger arrivals up by 22.0 per cent. The Government’s fiscal deficit more than doubled to BZ$33.4 million during the first quarter of 2014, owing to strong growth in spending that offset an increase in revenue.
The broad money supply increased by 4.0 per cent, owing to growth in net foreign assets, which outweighed a decline in domestic credit. Debt overhang continues to constrain credit to the private sector. The trade deficit widened as imports expanded by 20 per cent, while exports were down by 1.4 per cent. (Economic Survey of the Caribbean 2014)