Belize

Economic activity continues to be driven by tourism

Following a strong post-pandemic rebound, Belizean economic growth moderated in 2023 but remained robust, supported by the continuous recovery of tourism and commercial activities. In 2024, growth is expected to stabilise at a slightly lower level as the recovery wanes, still driven by service exports, mainly related to cruise tourism. However, the anticipated slowdown in the North American economy, the primary source market (accounting for approximately 80% of arrivals), could weigh on the sector's outlook. Household consumption (65% of GDP) is expected to benefit from lower inflation. However, the risk of climatic events affecting agricultural production and the persistence of high fuel prices could maintain inflationary pressures. Investment (21% of GDP), which is primarily private, will increase due to the development of tourist infrastructure. In the long run, these initiatives will boost cruise tourism, which is recovering more slowly than other segments. Advanced projects such as the Magical Belize land port and the offshore cruise terminal Port Coral located on Stake Bank Island are among the most progressed, although legal restrictions are delaying their commissioning. New public investments to modernise the port of Belize City are also under consideration. However, public consumption (12% of GDP) will continue to be damped by budget consolidation efforts

Budgetary consolidation continues

The government has continued to roll out budgetary consolidation initiatives during the 2023-24 fiscal year. While dynamic economic activity helps limit the public deficit, it is sustained by increased expenditures that particularly focus on raising public sector salaries, which were restricted during the 2021-22 fiscal year. A significant public debt servicing bill (5.5% of GDP in 2023) continues to penalise public accounts, although partial restructuring in 2021 temporarily reduced it. Tax revenues have increased due to improved collection, but the latter remain below pre-pandemic levels. Only a comprehensive reform would be able to address the weakness in resources. In 2024-25, the public deficit is expected to stabilise. Assuming continued consolidation efforts, the government should maintain a primary surplus of around 1.2% of GDP. However, electoral pressures could lead to an increase in public spending in the run-up to elections which are expected in late 2025.

Significant progress has been made in ensuring the sustainability of public debt. By the end of 2021, an agreement with "The Nature Conservancy" (TNC, a US environmental organisation) enabled the refinancing of the 2034 maturity "superbond" (representing the entire commercial external debt) through the issuance of Blue bonds, thereby reducing public debt outstandings by 10% of GDP. The 10-year grace period for repaying the new loan, coupled with low interest rates, will help reduce debt servicing costs until the 2034 fiscal year. In return, Belizean authorities must allocate the USD 180 million saved to marine conservation by 2041 and increase the proportion of protected shores to 30%. Furthermore, a discount on the PetroCaribe debt owed to Venezuela in 2022 further reduced the debt outstandings by 4.4% of GDP. These restructurings, combined with a strong recovery, GDP rebasing and a primary surplus have significantly alleviated the debt burden, around two-thirds of which is external. Assuming continued fiscal consolidation, the public debt outstandings are expected to maintain their downward trajectory.

After increasing in 2022 due to rising imports associated with the rebound in consumption, the current account deficit moderated slightly in 2023. The surplus in services (approximately 17% of GDP in 2023) expanded as tourism recovery continued. While the trade deficit (about 23% of GDP in 2023) remained substantial, moderating fuel prices alleviated it somewhat. In 2024, a further moderate reduction is expected in the current account deficit. Robust services will be offset by increases imports, particularly those driven by tourism. Repatriation of profits by foreign businesses may increase slightly but will be compensated by expatriate remittances mainly from the United States. The current account deficit will continue to be financed by foreign direct investments (FDI), as well as bilateral and multilateral loans. The Central Bank of Belize holds sufficient reserves (more than three and a half months of imports) to maintain the currency peg (2 BZD = 1 USD).

Divided opposition and border disputes

Prime Minister John Briceño from the People's United Party (PUP) (centre-left nationalist), was elected in 2020 for a five-year term. His government holds a comfortable parliamentary majority (26 out of 31 seats in the House of Representatives and 6 out of 13 seats in the Senate), which facilitates the implementation of policies, including budgetary reforms and crackdowns on crime associated with significant drug trafficking. The next general elections are expected at the end of 2025. The main opposition party, the United Democratic Party (UDP) is fragmented and will need to form alliances if it is to gain popularity. Regarding foreign policy, Belize will maintain diplomatic relations with Taiwan, reaffirmed by the visit of the Taiwanese President in April 2023. Relations with the neighbouring Guatemala will remain tense, with no progress on the border dispute covering more than half of Belize, submitted to the International Court of Justice (ICJ) for arbitration since 2019. As for Honduras' claim on the cays at the southern end of the Belizean barrier reef, the ICJ began hearing the matter in 2023.

Last updated: December 2023