Posted: Monday, April 20, 2020. 5:00 pm CST.
The views expressed in this article are those of the writer and not necessarily those of Breaking Belize News.
By Shanidy Vasquez, Msc. Economics: Coronavirus anywhere is a threat to people everywhere – Ellen Johnson Sirleaf
The 2020 global economy is expected to lose USD $5 trillion to the COVID-19 (Novel Corona Virus) pandemic with Latin America and Africa being affected the most (JPMorgan, 2020). The economic impacts of COVID-19 is also forecasted to be exponentially larger than the 2009 financial crisis and similarly to the Great Depression due to the virus being a supply rather than demand shock (Hausmann, 2020). The COVID-19 did not create a lack in demand but rather restrict economic output as persons were prohibited from working and creating a period of global stagflation: an economic slowdown with rising prices as the decrease in productivity creates shortages. Therefore, with the global economy crashing, an economic recession for Belize has become inevitable.
The Corona Virus pandemic is expected to lurch both the formal and informal sectors with individuals employed under the informal sector experiencing the most externalities even if they have been untouched by the virus. Informal workers such as vegetable and fish vendors who rely on their day to day earnings for consumption cannot afford to quarantine for a month and as such are faced with economic havoc and uncertainty of the remaining economic outlook. The quarantine becomes a form for the government to purchase time to instill the proper policies and legislations to shield the most vulnerable from the pressing economic hurdles they are faced with. The government must ensure that the remedy is not worse than the virus itself and should effectively invest the purchased time to reduce starvation and achieve its targeted impact of mitigating the shocks and containing the spread of the COVID-19. For each month of containment, it is forecasted that 2% points of GDP growth will be lost to the COVID-19 and thus governments are in a race on how to keep the economy afloat (OECD, 2020). The COVID-19 therefore becomes a moral paradox as Belize struggles to determine how to balance the health response with a risk of further economic collapse. Belize already had a 42% poverty rate1 and a 93% debt to GDP ratio in 2019 and with increases in borrowing and diverting the finance from projects that were set for development, the virus is set to financially decimate the nation whilst also increasing poverty rates and unemployment. Prior to the COVID-19, in 2018, Belize had a 9.4% unemployment rate with a 65.5% labor force rate, however the labor force grew exponentially larger than employment creation (SIB, 2019). Expressed differently, in 2018 the number of Belizeans seeking employment grew larger than the number of jobs available and with 65,762 Belizeans filing for 1 From the 2010 Statistical Institute of Belize Census Report, the Census report was set to be updated in 2020. unemployment assistance, attaining employment will worsen due to the deteriorating labor market conditions.
Tourism was Belize’s socio economic backbone as it contributed 44.9%, almost half, to Belize’s GDP in 2019. However, 70% of tourism output is expected to be lost to COVID-19 even when the economy resumes and thus the remaining outlook for tourism remains questionable (OECD, 2020, 2020). In addition, of the total visitors entering Belize, 62% were Americans whom injected income and provided employment to the stakeholders of the tourism sector such as tour operators, guides, hoteliers, restaurants, hair braiders etc. and with 6.6 million Americans filing for unemployment relief the economic context remains uncertain (Washington post, 2020).
Therefore, Belize will need to rely on its remaining industries for revenue generation; however, Belize already lacks a well-diversified economy. The primary sector (agriculture) only represents 10% of GDP activity and the secondary (manufacturing) 14.1% with the tertiary (services) representing the largest share of 66.8% hence, the nation is left with an already debilitated economy to withstand the shocks of the Novel Corona Virus. The COVID-19 therefore indicates the exponential impact an unforeseen event has on the Belizean economy and is a reminder of the importance of economic diversification as excessive dependency on external markets enables a nation to become fragile and threatened by exogenous shocks, especially if it is an industry characterized by fluctuating prices and shifting conditions of booms and slumps. The COVID-19 can reverse five to seven years’ worth of economic development in developing countries and with the brutal decline in economic activities, employment, consumer consumption and the increases in national debt, the COVID-19 tests the strength of the Belizean economy. With a crumbling tourism sector coupled with a weak diversification framework and an excessive reliance on importation, can Belize’s micro and macroeconomic scope withstand the shocks? It is amidst this paradigm that the following is recommended to relieve the economic pressures within the local economic context:
– Rely on domestic drivers of growth such as consumption of Belizean
products (example: livestock and agriculture)
– Provide financial relief and loans to firms most affected by COVID-19
– Postpone payment of water and electricity bills for 3 months
– Identify non-essential spending that can be curtailed (this does not
include the employee salary)
– Fuel liquidity by reducing commercial banks interest rates
– Use CARICOM to export agricultural products and earn foreign exchange
to prevent the exchange rate from depreciating
– Withhold GST payers from paying GST if they do not layoff workers
– Cut income tax for the remaining of 2020 to fuel consumer spending and
Although these measures are provided as a response for the short term effects, GOB will be obliged to thoroughly examine the economy to stimulate consumer consumption and revive the debilitated economy in the long term. If the policies and legislations to combat the COVID-19 are coupled with a diversification framework through institutionalist productive linkages whilst stimulating consumer consumption and employment, the economy can recover, however, in the absence of planning and a proper assessment of the impacts of the COVID-19 to the Belizean sector the virus could trigger the nation to suffer from the symptoms of a great recession.
-Stay Safe, Belize.
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