Wednesday, January 21, 2009

BELIZE PREPARING FOR WORLD DEPRESSION

PREPARING FOR THE BELIZE DEPRESSION OF 2009 – 2012

There is an old cliché, that says when you prepare for the worst, the worst NEVER happens! The outside world is already in a confirmed RECESSION now two years old and in Belize the effects are just starting to be felt. We seem to be running about a year behind the outside world schedule. That said, there is definitely a DEPRESSION coming in 2009 for the outside world and we can see vast industrialized economies, who are our biggest markets and sources of tourists unwinding into DEPRESSION.
It is something to do with psychology I suppose, but if our UDP CABINET prepares for the worst it probably will never happen. We lost a big chunk of our productive economy during 2008, which has been replaced by increased oil exports, even at a third lower prices. Tourism is going to take a big hit during 2009, the early visitor indicators show. Since tourism is one of the pillars of our government revenues, then that presupposes projections for general tax revenues for 2009 will drop drastically. It makes sense for our UDP CABINET to revise the projected government revenues for 2009 and 2010 downwards, from expectations.
What then are the WORST CASE SCENARIOS for our UDP CABINET during the 2009 and 2010 period, during the effects of the world depression?
Probably, the UDP CABINET should revise government budget spending downward a third? Since we are talking WORST CASE PREPARATION, then perhaps it would be smarter to drop revenue estimates by 50%.
We have had two hurricanes in ONE YEAR before, so let us estimate two hurricanes for 2009. At a cost of $150 million each in government costs.
We are getting more and more floods and have had two floods in one year, so let us throw two flood disasters into the WORST CASE SCENARIO pot, and plan for that as well, along with associated economic losses and costs.
ECONOMIC LOSSES FROM REDUCED TOURISM ACTIVITY looks like tourist revenues may actually drop over 50%, perhaps 75%? There is a lot associated economic activity with loss of tourism activity, in the general community.
Lastly but not leastly, with NEW reduced government tax revenues and lower expected local economic activity, then our fixed FOREIGN LOAN REPAYMENT SCHEDULES are going to effect the amounts of money available to maintain the government of Belize activities. For 2009, the $150 million borrowed in 2008 by the UDP Cabinet, can be spent and will create an articial blip on our GDP figure. It is not productive directly as a spending, but will create local internal economic circulation activity.

It looks like revising government tax revenues for 2009 and 2010 downward from previous estimates, by a third would be appropriate? This can be refigured in 2010 as projections and performance unfolds. We are not looking at rosy estimates of economic revenues here, but at what we consider to be the WORST CASE scenarios. This means the government budgets need to be re-adjusted to fit the revised situation as we MIGHT experience it. Go to it, UDP CABINET, do your job.
Generally speaking, it is times like these; that the National Debt looms more and more, like a chain and ball tied around our neck, as these FIXED REPAYMENT COSTS become larger in proportion to the much reduced expected available government tax revenues. We await with much interest the UDP Government delayed STATE OF THE NATION speech, for not only the economic figures the private sector needs for proper annual planning economic activity, but also the budget presentation for government size and activity. The question in my mind is; will the BARROW government prepare a budget for a DEPRESSION year WORST CASE SCENARIO, or will he let his civil servants prepare a budget based on more favorable, over optimistic artificial figures, as is usual, and which always get our governments in trouble.
The thing to remember is; if you prepare for a WORST CASE SCENARIO, the physcology of doing so, will actually prevent you from making stupid mistakes if these things happen and if not, then you end up looking like roses at the end of 2009 going into 2010 with a darned surplus in a GUARANTEED WORLD DEPRESSION YEAR. That is a pretty good economic and political outcome to be desired, I would think?

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