NO CHANGE IN BELIZEAN LIVES

Last week Government through the Statistical Institute of Belize released Gross Domestic Product (GDP) data for 1^st quarter of 2010.  At mid-point in the year the public is only now being provided with this data, which seem rather coincidental in light of the International Monetary Fund (IMF) recent Article IV preliminary assessment.  The data provided records economic performance for the period January to March 2010.  This column will review and provide some analysis on the data, but before proceeding will provide some commentary on how the data is presented and interpreted, so that our readers can have a clear understanding why the explanations sometimes seem contrary to the economic realities being faced by our people.

Positive recorded economic growth must be carefully examined within the broader context of a country’s overall state of wellbeing within the economy and its people.  Any country that has the required legal and regulatory framework that allows for freedom of economic enterprise can experience natural economic growth, but not necessarily economic development.  Development that is sustainable is characterized by a fundamental improvement in people’s livelihood and economic, political, and social wellbeing, which is assessed through the use of various indicators such as the human development index (HDI), poverty assessment and equality in addition to GDP.  Therefore in reviewing GDP performance one must not lose sight of the big picture, that Belizeans continue to find it difficult to find jobs, businesses are closing and cutting staff and crime has taken the society hostage.  Also, the predictability of future economic performance cannot always be easily made, when countries like Belize are susceptible to exogenous shocks that can negatively impact on its economy.

GDP as previously defined in this column, is the main measurement of economic activity within an economy.  It measures the real value of output produced, by all economic activity carried out within a country regardless of ownership (domestic or foreign) and it is calculated without subtracting any allowances for capital formation, which is the addition of plant and equipment within firms.  For comparative purposes constant prices are used which are prices that are adjusted for inflation using a reference year as a benchmark.  As all economist would note, GDP is a measurement with its own shortcomings as it fails to take account of several areas such as services provided by homemakers and the value of transactions individuals would do for themselves; under-ground or illegal activity are not recorded; improvement in quality of output; the social cost of negative by-products and their effect on the environment and lastly GDP fails to measure any changes in wellbeing or standard of living.  As most Belizeans can attest to, recordings of positive economic growth does not necessarily relates to a positive impact on the 43% of the population classified as poor or vulnerable to poverty.   For comparative purposes and to determine changes in GDP, a review is undertaken of the value of output for the same period in year 1 and year 2.  Therefore, for us to understand the performance or change in GDP for 1^st quarter 2010 it is compared to 1^st quarter 2009, with the change recorded as either positive or negative.  However, at times it is important to assess GDP performance from one quarter to the other consecutively.

Overall, the 1^st quarter of 2010 recorded positive economic growth of 3.5%.   On the surface this is a feather in GOB’s cap, however Belizeans need to be weary of placing much confidence and hope in any sustained recovery.  The nature and structure of economic activity in Belize, from the major economic sectors such as agriculture and tourism, shows the first half of the year as the period where output is the highest, this is due to seasonality.  Historical data on GDP does support this assertion as well, with output being less in the second half of the year.

Table 1

^{Source: Statistical Institute of Belize}

As can be noted in table 1 the value of output from all sectors increased positively when compared to last year, although the majority of those increases were below 5% with the exception of government services, hotels and restaurants, construction and manufacturing.  The fishing sector is the only one that recorded a significant decline of 33.3%.  Overall output was driven by the performance of the manufacturing sector, which recorded growth of 9% due in part to increased petroleum production.  The continuous expansion of the oil sector brings to bear the need for Government to have adequate regulatory policies in place that will ensure the levels of transparency in drilling operations and adherence to sustainable practices that will not jeopardize the environment.   The hotel and restaurant sector recorded an 8.4% increase from last year.  This is due to some increases in cruise tourist arrivals and overnight arrivals this year.   An important observation is the rather small increase in taxes on products, which only increased by 1.3%.  This is a direct result of total products actually being consumed or purchased not increasing significantly.  It will be interesting to review the output from taxes in the 2^nd quarter of 2010 since this would capture the period which the increase in GST was instituted.

As the data verifies and Government is quick to take credit for the positive growth recorded for the 1^st quarter, Belizeans must be mindful that economic recovery remains tenuous, as this is due to all the challenges noted in last weeks’ issue that examined the global context and the IMF’s observation of Belize’s economy.  The risk to several sectors remains acute with the increase escalation of crime in Belize; the tourism sector can expect some negative effects with reduced arrivals on shore.  The commodity sectors such as sugar, bananas and citrus will be vulnerable to global shocks compounded with domestic management and regulatory challenges.   In the case of sugar, the current management issues and fragmentation of sugar cane farmers, continue to result in reduced sugar cane production.   Thus, the challenges of development continue to remain pertinent and ought to be reflected in Government’s economic policy formulation and response.  For it is important to distinguish that economic growth is not synonymous with economic development.  Belizeans continue to face the many challenges of low employment levels, rising cost of living and an increasing threat to their personal security.  Consequently, Government must address meaningfully Belize’s prospects for sustained economic growth that will result in an improved quality of life for all Belizeans, not just the choice few that continue to benefit.

Gwyneth Sydney Nah

Comments welcome at GwynethNah@gmail.com

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