BELMOPAN, Belize (CMC) — The International Monetary Fund (IMF) says Belize’s economic recovery is strengthening with economic growth in the second quarter of this year estimated at 5.4 per cent.

An IMF delegation has just ended a two-week visit to the Caribbean Community (Caricom) country, indicating that real gross domestic product (GDP) grew by 1.4 per cent last year.

The IMF delegation headed by Daniel Leigh, the deputy division chief at the Research Department of the Washington-based financial institution, noted that the country’s economic recovery is strengthening, supported by a favourable global environment.

The IMF said that the medium-term outlook remains challenging and that real GDP growth is projected at 2.2 per cent in 2018 and just below two per cent in the medium term, in line with recent trends.

It said the current account deficit is projected to gradually narrow but remain significant, reflecting structural weaknesses, with international reserves projected below three months of imports of goods and services over the medium term.

A fiscal stance that is stronger than projected in the baseline scenario, which assumes no fiscal adjustment beyond financial year 2018-19, would be needed to reduce public debt from its end-2017 level to prudent levels over the medium to long term and build buffers against shocks, the IMF said.

The Washington-based financial institution said that downside risks remain substantial.

“Contested legacy claims, estimated at about five per cent of GDP, could lead to large public and external financing needs. Reputational risks from potential financial misuse of the offshore sector’s complex entities, and governance concerns, could weaken investor confidence and renew pressures on CBRs, (Corresponding Banking Relationships) which would weaken banks.”

The IMF said that these vulnerabilities would be exacerbated by a growth slowdown among Belize’s main trading partners, higher international energy prices, and increasingly severe natural disasters associated with climate change.

“Such adverse developments could undermine public support for the Government’s reforms and endanger debt sustainability. On the upside, additional foreign direct investment, including in connection with the tourism industry’s expansion, and a successful implementation of the Growth and Sustainable Development Strategy (GSDS) could result in a sustained rise in growth.”

The IMF said that policies to enhance Belize’s growth and resilience are essential for addressing these challenges and risks, and for improving the economic well-being of all Belizeans.

It said that improving the business climate remains a central priority. Belize’s outlook of rising growth, especially in the agriculture, call-centre, and tourism sectors, provides an opportunity to make progress on policies that will strengthen the recovery in the short term and raise long-term growth without significant fiscal costs.

The IMF said that tourism arrivals were up 17.1 per cent in January–June 2018 compared with a year earlier, reflecting economic expansion in Belize’s trade partners and an increased number of flights. The unemployment rate declined to 9.4 per cent in April 2018 from 9.7 per cent six months earlier, while inflation was below one per cent.

The IMF said that the current account deficit narrowed to 7.6 per cent of GDP in 2017 from 8.4 per cent of GDP in 2016, reflecting subdued imports and higher receipts from tourism.