The economy is projected to expand modestly in 2011, with inflation up somewhat from low levels, due mostly to higher fuel and food prices. Consistent with a continued improvement in the terms of trade, the external current account deficit would remain at around 3 percent of GDP, with the reserve cover at about 3 months of imports by year-end. Liquidity in the banking sector is ample, but nonperforming loans remain at a high level. At the same time, potential growth has fallen, with weaker business and social indicators. Within the relatively weak policy framework, these factors have heightened Belize’s vulnerability to shocks.
Fiscal Consolidation. The current fiscal strategy is insufficient to place the public debt ratio firmly on a downward trajectory, and to address the large financing needs that are projected to emerge over the medium term. Fiscal policy should thus be strengthened to rebuild macroeconomic buffers in the context of rising rollover risks and emerging contingencies.
Safeguarding financial sector and monetary stability. Credit risks remain elevated, warranting continued and close monitoring by the central bank. The authorities are using the recommendations of the recent FSAP mission to guide financial sector reforms.
Boosting growth and reducing poverty. Boosting growth will require removing key infrastructure bottlenecks and improving the environment for doing business. While the authorities have strengthened their anti-poverty policies, greater efforts are needed in monitoring and evaluating existing programs relative to their targets and cost efficiencies.
Published:December 02, 2011. IMF.Belize; Staff Report for the 2011 Article IV Consultation.Country Report No. 11/340