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The International Monetary Fund (IMF) says Belize has weathered the global financial crisis relatively well when compared with other CARICOM countries and is predicting 2.5 per cent economic growth for the country.
The IMF, which has just concluded its annual consultation with the country, said that output expanded by 2.7 per cent in 2010, owing largely to activity in the electricity and wholesale and retail trade.
It said that the 12-month inflation was at zero in 2010, reflecting primarily continued weakness in domestic demand, and picked up slightly in the quarter ending in May driven by higher food and fuel prices.
The Washington-based financial institution said the country's external position strengthened, as a narrowing in the current account deficit, from 6.1 per cent of gross domestic product in 2009 to three per cent last year, underpinned an increase in foreign reserves to 3.25 months of imports at the end of 2010.
It said that the public debt rose to 83 per cent of GDP.
Bank credit growth slow
But the IMF noted that in the fiscal year 2010-2011, the overall fiscal deficit widened by 0.3 percentage point of GDP to 1.5 per cent, reflecting an increase in expenditure and weak grant disbursements.
"This outturn was, however, better than envisaged in the budget. Meanwhile, bank prudential indicators have remained weak, with high nonperforming loans (NPLs) and low provisioning. Bank liquidity remains ample."
It said that despite a cut in reserve requirements, bank credit growth has slowed as fewer investment opportunities and high NPLs continue to constrain new lending. Improvements in social indicators have been protracted, despite the allocation of significant resources to social protection.
"The macroeconomic outlook for 2011 remains moderately positive. Output growth is projected at 2.5 per cent, reflecting a strong performance in the first quarter, supported by an expansion in manufacturing and electricity sectors, and a modest recovery in stayover tourist arrivals."
Inflation to go higher
But the IMF warned that higher food and fuel prices are expected to push inflation slightly upward and the external current account deficit is projected to remain at about three per cent of GDP in the context of some improvement in the terms of trade.
The reserve coverage would remain at around three months of imports by year-end, it added.
The IMF commended the authorities for their macroeconomic management, which enabled Belize to weather the financial crisis relatively well.
It said the near-term outlook was positive, but that there were "vulnerabilities in the banking system, rising gross financing needs of the public sector, and the weak investment climate. The recent rise in poverty is also a cause for concern".
It said against this backdrop, it was encouraging the authorities to advance the reform agenda and further tighten fiscal policy, including containmnent of the wage bill.
"A gradual increase in the primary surplus would keep financing needs manageable and place the public debt on a downward path," the IMF said, cautioning that growing contingent liabilities could put an additional burden on public finances, requiring close monitoring over the medium term.
The IMF, which has just concluded its annual consultation with the country, said that output expanded by 2.7 per cent in 2010, owing largely to activity in the electricity and wholesale and retail trade.
It said that the 12-month inflation was at zero in 2010, reflecting primarily continued weakness in domestic demand, and picked up slightly in the quarter ending in May driven by higher food and fuel prices.
The Washington-based financial institution said the country's external position strengthened, as a narrowing in the current account deficit, from 6.1 per cent of gross domestic product in 2009 to three per cent last year, underpinned an increase in foreign reserves to 3.25 months of imports at the end of 2010.
It said that the public debt rose to 83 per cent of GDP.
Bank credit growth slow
But the IMF noted that in the fiscal year 2010-2011, the overall fiscal deficit widened by 0.3 percentage point of GDP to 1.5 per cent, reflecting an increase in expenditure and weak grant disbursements.
"This outturn was, however, better than envisaged in the budget. Meanwhile, bank prudential indicators have remained weak, with high nonperforming loans (NPLs) and low provisioning. Bank liquidity remains ample."
It said that despite a cut in reserve requirements, bank credit growth has slowed as fewer investment opportunities and high NPLs continue to constrain new lending. Improvements in social indicators have been protracted, despite the allocation of significant resources to social protection.
"The macroeconomic outlook for 2011 remains moderately positive. Output growth is projected at 2.5 per cent, reflecting a strong performance in the first quarter, supported by an expansion in manufacturing and electricity sectors, and a modest recovery in stayover tourist arrivals."
Inflation to go higher
But the IMF warned that higher food and fuel prices are expected to push inflation slightly upward and the external current account deficit is projected to remain at about three per cent of GDP in the context of some improvement in the terms of trade.
The reserve coverage would remain at around three months of imports by year-end, it added.
The IMF commended the authorities for their macroeconomic management, which enabled Belize to weather the financial crisis relatively well.
It said the near-term outlook was positive, but that there were "vulnerabilities in the banking system, rising gross financing needs of the public sector, and the weak investment climate. The recent rise in poverty is also a cause for concern".
It said against this backdrop, it was encouraging the authorities to advance the reform agenda and further tighten fiscal policy, including containmnent of the wage bill.
"A gradual increase in the primary surplus would keep financing needs manageable and place the public debt on a downward path," the IMF said, cautioning that growing contingent liabilities could put an additional burden on public finances, requiring close monitoring over the medium term.