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Oct 29, 2009

Prime minister says economy is in recession

Story PictureOn the day the US announced its recession may be over, in Belize, Prime Minister Barrow admitted that we are now in the grips of a recession. Significantly, revenue collections plunged and according to the government, we are facing the brunt of the global financial crisis. And if you are wondering how to weather the storm leading up to the Christmas, the stimulus depends on the financial institutions. News Five’s Jose Sanchez has a report on the bleak economic picture.

Jose Sanchez, Reporting
With the rising cost of fuel and with interest payments on the Super Bond looming; coupled with a shortfall in revenue collections, it was not surprising that the PM began his quarterly press conference with bad news about the economy.

Prime Minister Dean Barrow
“To be blunt the news is not good. I think that we all in this country, including the experts, underestimated the effects of the global economic crisis on Belize. Of most importance is what it has done to our tax revenue collections. Our revenue tax collections stood at two hundred and ninety-five point three million as of September of this calendar year. That I’m afraid ladies and gentlemen, represents a decline of thirty point five million dollars or nine point four percent over the similar period for 2008. This was caused primarily by the sharp decrease in tax receipts most acutely with respect to the collections at the Customs and the GST Departments. Collections there are heavily reliant on imports to source the revenue and there has been a sharp decline in imports. Indeed, the external trade statistics from the S.I.B., Statistical Institute of Belize recorded gross imports at six hundred and forty-eight point nine million dollars during the first six months of 2009, and this is twenty-one point two percent lower than in the comparable period of 2008. Imports into Free Zone were hardest hit. Importation there fell thirty-eight point nine percent to one hundred and fourteen point five million dollars. This, of course, meant that our collections on in transit goods, or collections by way of the social fee slumped by forty-two point nine percent to only one point nine million dollars during the first six months of fiscal year 2009-2010. Non-tax revenue receipts also decreased by ten point four million dollars to thirty-four point two million as a consequence of the slower pace of petroleum royalty collections and the timing of Central Bank transfers.”

Total expenditures went up slightly, even though an increase in recurrent expenditures was noteworthy and that is because capital expenditure decreased by twenty-six point five percent. But the PM admitted that the country is in a recession.

Prime Minister Dean Barrow
“The Statistical Institute of Belize had forecast GDP growth for this fiscal year at two point five percent, marginally higher than the IMF had done. But the indicators now suggest in fact a dramatic swing of at least three percent which, if these indicators hold, will result in a contraction in negative GDP growth for 2009. In effect, it has to be well and truly said that our economy is in recession. Now, this clearly means that we are facing tremendous operational difficulties. We are going to next year have to deal with the step up on interest payments on the super bond from four point five percent to six percent and that’s going to translate into something like ten million US more that we must find by way of debt servicing.”

Barrow said that a petroleum Royalty from Belize Natural Energy received in October was not reflected in the revenue figures. However, if there was any silver lining in the dark financial cloud, the PM said it could be seen shining in the Foreign Reserves.

Prime Minister Dean Barrow
“That’s in contrast to what the operational fiscal picture looks like. That is a singularly bright spot. Our foreign reserves now stand at four hundred and fifteen million, three hundred and twelve thousand Belize. That is the highest that the reserves have been in a decade. For sure our currency is not under any threat and the kind of months of import cover that this gives us is comforting.”

The PM said that in addition to a cabinet subcommittee to scrutinize revenue collection, his administration being one year on the job, expects the International Financial Institutions (I.F.I.’s) such as the I.D.B., the C.D.B. and S.I.F. to increase funding to projects to move the economy forward.

Prime Minister Dean Barrow
“This would allow us to benefit from increased inflows in terms of project funding from the I.F.I.s, the International Financial Institutions. And that has indeed proving to be the case.”

Reporting for News Five, Jose Sanchez.

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