Life in a time of Recession

When the Prime Minister announced last week that the nation was in a recession it had to have been an extremely painful moment.  After all just eight months earlier he was talking about the better days which were ahead for the nation.  In his budget speech for 2009/2010 he even used Greek Mythology to express his optimism when he said:  “once again Prometheus is free to fly.”

So what happened to that optimism?  Eight months into the financial year Belizeans are told that the country is in a recession.   There was no glimmer of hope, no promise of possibilities, there was no talk of recovery any time soon, and worse, there seems to be no plan that will help the nation weather the storm, so that when the recession is over the country would be in a position to move forward instead of trying to catch up.

For many Belizeans the Prime Minister’s announcement merely confirmed what they already knew, and for sure many had started to adjust their spending habits.  Indeed this assumption finds merit in the fewer number of Belizeans engaging in luxury spending, vacation spending and the like.  Clearly they do not have the disposable income to engage in spending on new vehicles, weekend travels and so on.  Even the number of women going to hair salons to have their hair done has reduced, according to some in the industry.    The reason for this is because there is no disposable income for such activities.

During a time of recession it is expected that consumers will spend more responsibly–be more frugal.  How the Belizean consumer chooses to spend his income will first be dictated by the cost of food and other important expenses such as utilities.  Each additional dollar spent on food items, or each additional dollar spent to pay for electricity, water, rent or mortgage, is a dollar less in savings, or a dollar less to put aside for other important matters like health care or education.  Smart thinking parents will not spend on luxury commodities or even consider investing in such things as purchasing shares in a telephone company.    What this all means is that consumer spending will have a tremendous effect on how long the nation remains in recession.

If consumer spending remains down for too long in the Belizean economy, an economy where government depends so heavily on revenue from taxes, and if the productive sector cannot find the needed capital for investment, then government will have to find a way to generate income to meet its expenses.  There is only one place Government will be able to find that new money and it is from taxation. The question then is not whether taxes will go up, but when, and by how much.

The Hon. John Briceño, in an interview on Love FM said he told the Prime Minister in March that his stimulus package wouldn’t work; that his budget was off by $100 million.  The Prime Minster announced a budget shortfall of $90 million. It may very well be that this newspaper will soon be able to echo similar sentiments when the Prime Minister has to come before the nation to tell Belizeans that even after adding $1 tax on fuel, that he will once again be raising taxes on the Belizean people.    What is for sure is that everyone can forget about that promise to eliminate income tax for anyone earning less than $650 per week.

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