“Our economy is in recession:” PM Barrow
Posted: 30/10/2009 - 10:26 AM
Author: Adele Ramos - adelescribe@gmail.com
Prime Minister Dean Barrow opened his long overdue quarterly press conference held at the Princess Hotel and Casino at 10:00 Thursday morning by finally making the formal declaration that confirms what key business players have been saying anecdotally for several months: “Our economy is in recession.”
While the Statistical Institute of Belize (SIB) has yet to release new data on the gross domestic product (GDP), the SIB on Wednesday released trade statistics updated to July 2009, showing that imports had contracted 21.8%, from $990.3 million to $774 million; while Belize’s exports had declined similarly by 21%, from $384 million to $303 million.
The oil data give the most glaring picture, with exports down from $128 million in 2008 to $52.6 million for the first seven months of 2009 – a plunge of nearly 60%.
Belize’s foreign reserve position, said Barrow, is the “singularly bright spark,” standing at BZ$415,312,000, the highest in a decade. However, that is partly due to an International Monetary Fund (IMF) arrangement under which Belize (like other developing countries) accessed its Special Drawing Rights (SRDs) to prop up its balance of payments position, important to sustain trade.
“For sure, our currency is not under any threat,” Prime Minister Barrow asserted.
His budget read back in March 2009 was upbeat on the performance of the Belize economy. The SIB had forecasted GDP growth at 2.5%, higher than the IMF.
“The indicators now suggest a dramatic swing of 3%, which, if these indicators hold, will result in contraction or negative GDP growth for 2009,” Barrow elaborated. “It has to be well and truly said that our economy is in recession.”
The experts in Belize, he claimed, underestimated how the global economic crisis would affect Belize.
“The effects of that global crisis have been many, and perhaps of most importance is what it has done to our tax revenue collections,” Barrow added.
Budget out of balance
Giving a run-down of Government’s fiscal stance, the Prime Minister detailed the numbers from April to September 2009, and compared them with the same six months in 2008. Those six months represent the first half of Government’s fiscal period.
According to Barrow, who is also the Minister of Finance, tax revenues tallied to a dismal $295.3 million as of Sept 2009 – a decline of 30.5 million or 9.4% from amounts for the similar period for 2008, blamed on a slowdown in importation, trade and business activities.
“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,” said Barrow. “Collections there, of course, are heavily reliant on imports to source the revenue, and there has been a sharp decline in imports.”
The Prime Minister said that a Cabinet sub-committee will investigate the operations at Customs and at the General Sales Tax Departments, to study whether they could improve efficiencies and ensure Government is not being shortchanged in revenue.
“I’m not pointing any fingers, but it is clear that as things tighten, the incentive for people to avoid taxes as much as possible, increases; and we, of course, on our side have to do our best to ensure that we do collect the taxes that are properly due to the government and people of this country.”
Import numbers plunge
“The external trade statistics from SIB, recorded gross imports at $648.9 million during the first 6 months of 2009; and this is 21.2% lower than in the comparable period of 2008,” said Barrow. “Imports into the Free Zone were hardest hit,” falling by 38.9 % to $114.5 million, he added.
The SIB report for January to July 2009, released Wednesday, indicated that trade inside the Commercial Free Zone was substantially affected, with those imports alone falling 45%, from $168 million for the same period in 2008 to $92.37 million for the first 7 months of 2009.
Demonstrating how falling free zone trade has affected the government Treasury, Barrow said: “This, of course, meant that our collections on in-transit goods, our collections by way of the social fee, slumped by 42.9% to only $1.9 million during the first 6 months of fiscal year 2009/2010.”
Meanwhile, domestic exports for April to September were reported at $258.9 million – an 18.7% decline over last year, Barrow indicated.
Oil money slipping away
Non-tax revenue receipts decreased by $10.5 million to $34.2 million, said Barrow, “as a consequence of the slower pace of petroleum royalty collections and the timing of Central Bank transfers.”
GOB expects, however, for non-tax revenues to perform closer to budgeted figures during the remainder of the fiscal year, he said, indicating that the quoted figures did not include royalties government had just collected for October. He did not say exactly how much money GOB collected.
The windfall tax on petroleum implemented in late 2008 did not yield any new revenue stream for Government, because prices had quickly fallen below the US$90 a barrel threshold the Barrow administration had set. However, in April 2009, Government implemented a $1.00 flat tax on each gallon of fuel sold at the pumps – and Barrow says it will stay because Government still needs the extra revenue. He had declared that with the new $1.00 gas tax they were “home free” in financing the budget deficit.
Tourism still not looking good
The number of tourists coming to Belize increased overall by 5.4%, but the number of stay-over visitors, the more significant spenders, decreased by 5.2%. Therefore, overall, tourism spending also fell by 3.2% to $392.4 million, the Prime Minister reported.
Social projects apace
During this morning’s press conference, Barrow also detailed several existing and proposed financial arrangements that could keep social projects apace. Among them are the recently approved BZ$45 million (US$22.5 million) from the Inter-American Development Bank; US$4.5 million from the Caribbean Development Bank for the Belize River Valley communities; US$39.5 million (or nearly $80 million Belize dollars) being sought from Central American Bank for Economic Integration (CABEI), headquartered in Tegucigalpa, Honduras (including funds to open up the Southern Highway to Jalacte, Toledo); and 9mn Euros or BZ $25 million from The European Union under the accompanying measures for sugar (for which an agreement was signed in July).
Barrow calls out developed world
Still, Barrow said, money pledged by the developed world to Belize and the rest of the developing world, to offset the negative consequences of the world financial/economic crisis, has yet to trickle down.
“I have yet to see a single additional penny come to certainly this side of the world as a consequence of the crisis and in accordance with the promises made by the developed world,” said Barrow, indicating that it is as a consequence of what has happened in the developed world – and particularly on Wall Street – that the developing world is experiencing heightened economic hardships.
“I still repeat my call for the developed world to do what they said they will do,” said Barrow. “We could always use more project funding.”
More pain/more hope?
Already, Barrow is pointing to increasing financial challenges in the next budget year: “We are going to next year have to deal with the step-up in interest payments on the super bond from 4.5% to 6%,” said Barrow, indicating that Belize will have to find US$10 million more for debt servicing.
While Barrow painted a very bleak economic/financial picture at this morning’s press conference, he pointed to forecasts of recovery: “As the world economy begins to recover, so will our economy,” said Barrow, citing recent news that “The US economy is beginning to grow again... While we’ve heard before of these so-called green shoots of recovery...the evidence seems harder now that recovery is beginning.”
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