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no-photoThe International Monetary Fund (IMF) team led by Jacques Bouhga-Hagbe has concluded its 2014 Article IV Consultation on Belize. The team arrived in the jewel on April 28 and held its consultations up to May 9th. The report shows that the Belizean economy is estimated to have grown by only 0.7 percent in 2013 mainly because of continued decline in oil production and weak agricultural output, especially sugarcane and citrus.

Inflation eased to 0.5 percent from 1.3 percent a year ago, as commodity price pressures abated. Private sector credit grew by 3.8 percent (y/y) in March 2014. While declining, Non-Performing Loans remained high at 17.6 percent of total loans at the end of 2013 while the banking system’s capital buffers improved and weaknesses in the system are being addressed.

The external current account deficit widened to 4.5 percent of GDP up from 1.2 percent in 2012, as exports of oil and agricultural products fell sharply, while imports of fuel and electricity picked up. Nonetheless, the report shows that international reserves improved to 4.3 months of imports (up from 3.3 months at end-2012) owing mainly to PetroCaribe financing and private capital inflows.

The primary fiscal surplus for2013/14 is estimated to have fallen to 1 percent of GDP, from 1.4 percent of GDP in 2012/13. The IMF announced that Revenue collection was better than budgeted, as robust tax revenues more than offset the decline in non-tax revenues. However, substantial increases in wages and salaries, transfers and interest payments drove up current expenditure. Capital expenditures were also higher than budgeted because of the need to rebuild the infrastructure that was badly damaged by rain.

GDP growth is expected to hover around 2.5 percent a year as declining oil production would be offset by higher output of other commodity exports, tourism and construction. Inflation is projected to remain low owing to the exchange rate peg and subdued inflation in trading partners. The report also indicates that authorities’ medium-term policy plans would maintain the primary surplus around 1 percent of GDP, as in 2013, which could lead to significant increases in public debt as a share of GDP, especially if a court decision calls for the payment of compensation to the former owners of the recently nationalized companies.

During its visit, the IMF team met with Prime Minister Dean Barrow, Financial Secretary Joseph Waight, Central Bank Governor Glenford Ysaguirre, other government and central bank officials, representatives of the private sector, labor unions and members of the opposition.

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