IMF gives mixed review to Belize economic performance
The International Monetary Fund (IMF) says Belize's economic outlook is characterised by sluggish growth, weak fiscal stance, and external and financial sector vulnerabilities.
But the Washington-based financial institution also noted the recent improvement in economic activity, despite the significant deterioration in the fiscal stance and the widening external current account deficit.
According to the IMF, gross domestic product (GDP) growth reached 3.6 per cent in 2014, up from 1.5 per cent in 2013 and well above the five-year average of 2.9 per cent.
It said a rebound in agriculture, strong performances in tourism, electricity, construction and services offset the significant decline in oil-related activities. The fall in international oil and food prices pushed headline inflation to -0.2 per cent as of December 2014.
But the IMF said that despite strong tourism receipts, falling exports and relatively strong imports widened the external current account deficit to 7.6 per cent of GDP in 2014, up from 4.4 per cent in 2013.
It said PetroCaribe, the Venezuela-led oil initiative, and other official disbursements continued to finance the current account deficit and help build international reserves equivalent to five months of imports at end-December 2014.
But the IMF said that the fiscal stance deteriorated significantly in the financial year 2014-15 and that the primary fiscal balance recorded a deficit of 1.5 per cent of GDP, down from a revised deficit of 0.2 per cent of GDP in financial year 2013-14 and well below the surplus of one per cent of GDP envisaged in the 2014-15 budget.
The IMF said private credit growth recovered and reached 4.7 per cent in 2014, up from 3.5 per cent in 2013, supported by strong real estate credit and loans to the sugar sector, while broad money grew by 7.9 per cent.
The banking system remained highly liquid. Non-performing loans declined to 15.7 per cent at end-December 2014, down from 17.6 per cent at end-2013.
The IMF said it welcomed the settlement reached on one of the two nationalised companies but noted that significant contingent liabilities from these nationalisations remain, which could further raise the already elevated debt levels.
It called for a concerted effort to reduce vulnerabilities, rebuild policy buffers, and accelerate medium to long term growth and underscored the importance of prompt and credible fiscal efforts that would boost investor confidence and private investment.
The IMF agreed that the recent termination of corresponding banking relationships with Belizean banks, and banks in many other countries, could have a significant impact on financial stability and economic activity in the affected countries.
The Fund urged the authorities regulating international banks that are terminating correspondent banking relationships to better clarify their expectations of how these international banks should deal with local banks they perceive as "high risk."