• The Government is proposing to spend a total of $1 trillion for the 2023/24 fiscal year. This represents Jamaica’s largest budget in history. Minister of Finance and the Public Service, Dr. the Hon. Nigel Clarke, made the disclosure as he tabled the Estimates of Expenditure in the House of Representatives on Tuesday, February 14.
• Clarke said the funds are allocated across the main expenditure categories and is comprised of non-debt recurrent expenditure of $665.7 billion, capital expenditure of $75.3 billion, and debt servicing of $280.6 billion. Included in the non-debt recurrent expenditure are allocations to implement the second year of the three-year public-sector compensation restructure and allocations to operationalise the Independent Fiscal Commission.
• Clarke informed that the largest single item of expenditure is the amount of $338 billion for wages and salaries, which includes provisions for the second year of implementation of the public-sector compensation restructuring.
• Debt service at 9.5% of GDP, which reflects amortisation and interest payments, mirrors action taken over prior years to reduce the debt burden. With the tabled debt service services structure, Debt to GDP ratio is projected to be down to about 74.2% at the end of 2023/2024 fiscal year.
• Additionally, Central Government revenue and grant inflows are estimated at $897.6 billion, which, alongside the above-the-line expenditure of $887.7 billion, will generate the required fiscal balance surplus of $9.9 billion or 0.3% of GDP, consistent with fiscal rules.
• The capital expenditure programme for Public Bodies is budgeted at $75.9 billion or 2.6% of GDP, with the National Housing Trust, Clarendon Alumina Production, and National Water Commission accounting for 68% of the capital expenditure.

(Source: JIS News)

• Last week, the local media reported that the government had reached an agreement to authorize an increase in contributions to the National Insurance Board (NIB), the entity that administers the country’s social security system.
• Currently, the total contribution per employed person is 9.8% of salary, with 3.9% coming from the worker and 5.9% from the employer, while self-employed persons contribute 8.8% of their incomes.
• Five years ago, an actuarial assessment of the system with the technical assistance of the International Labour Organization concluded that contributions should be raised immediately to ensure the medium-term viability of the social programs towards 11.8%, of which 8.05% should go to underwrite pension benefits. The report also recommended 200bp increases to contributions every two years until 2036, when they should reach 23.8%.
• Myles LaRoda, minister of state in charge of the NIB, warned that in the absence of a contribution adjustment, the NI Fund would lose $95Mn this year, a situation that he considered “unsustainable”. He indicated that NIB will pay some $27Mn each month in pensions to 44,000 citizens while it collects $23Mn. That is a $48Mn deficit in pensions alone, with the other benefits (unemployment, disability, etc.) making up the rest of the imbalance.
• LaRoda went on to say that contribution hikes are unavoidable given the increase in life expectancy, especially since there has been only one adjustment in the NIB rate during the almost five decades of its existence. The pension system has been in deficit since 2016 and said imbalance has been $276Mn between 2019 and 2021 alone. Under the current parameters, the system will exhaust its reserves by 2028.
• Although the NIB rate increase is a politically sensitive issue, it is believed that it is a much-needed policy move so an official confirmation should be made public in the coming days or weeks.

 (Source: Oppenheimer)

• Brazil's economic activity increased by 2.9% in 2022, according to a central bank index released on Thursday, boosted by the services sector which defied earlier predictions of mild growth, but with recent months' performance showing a loss of momentum.
• After starting the previous year with a forecast of a 0.3% expansion for the Brazilian economy in 2022, private economists surveyed weekly by the central bank now project 3% growth in 2022, on the back of resilient services activity and a stronger labour market.
• The IBC-BR economic activity index, a leading indicator of gross domestic product, rose 0.29% in December from November on a seasonally adjusted basis, surpassing the 0.1% growth forecast by analysts in a Reuters poll. Compared to the same month in 2021, the increase was 1.42%.
• The annual growth of Latin America's largest economy was also aided by increased government spending by former President Jair Bolsonaro, who boosted social expenses ahead of a presidential election.

(Source: Reuters)

• Avian flu has reached new corners of the globe and has become endemic for the first time in some wild birds that transmit the virus to poultry, according to veterinarians and disease experts, who warn it is now a year-round problem.
• Reuters spoke to more than 20 experts and farmers on four continents who said the prevalence of the virus in the wild signals that record outbreaks will not abate soon on poultry farms, ramping up threats to the world's food supply. They warned that farmers must view the disease as a serious risk all year instead of focusing prevention efforts during spring migration seasons for wild birds.
• The United States, Britain, France, and Japan are among the countries that have suffered record losses of poultry over the past year, leaving some farmers feeling helpless. The virus is usually deadly to poultry, and entire flocks are culled when even one bird tests positive.
• "It's a new war," said Bret Marsh, the state veterinarian in the U.S. state of Indiana. "It's basically a 12-month vigil." Indiana lost more than 200,000 turkeys and other birds over the past year, while total U.S. deaths top 58 million birds, according to U.S. government data, surpassing the previous 2015 record.
• Egg prices set records after the disease wiped out tens of millions of hens last year, putting a staple source of cheap protein out of reach to some of the world's poorest at a time the global economy is reeling from high inflation.
• That being said, this avian flu outbreak and the resulting decline in birds may bode well for other segments of the protein industry. Beef producers like Marfrig may experience an increase in demand as consumers seek alternatives to poultry.

(Sources: Reuters & NCBCM Research)

• Sales at retailers rose far more than expected in January as consumers persevered despite rising inflation pressures. 
• Advance retail sales for the month increased 3%, compared with expectations for a rise of 1.9%, the Commerce Department reported Wednesday. On a year-over-year basis, retail sales increased 6.4%, which was exactly in line with the consumer price index move reported Tuesday.
• Inflation, as gauged by the consumer price index, accelerated by 0.5% in the first month of the year, the Labor Department announced Tuesday. The sales report indicates that even with elevated inflation pressures, consumers continued to spend.
• The data comes as the Federal Reserve is grappling with rising prices that appear to be abating but are still well ahead of the central bank’s 2% annual target. There’s evidence that the increases are having an impact, though inflation remains persistent and could be aggravated by the economic reopening in China and rebounding growth across Europe.

(Source: CNBC)

• Radio Jamaica Limited (RJR) recorded a net profit of $381.38Mn for the third quarter that ended December 31, 2022, representing a 252.8% y-o-y increase in profitability. Additionally, the company’s bottom line for the nine months increased by 34.0% to $329.1Mn when compared to the same period in 2021. This result was bolstered mainly by a Bargain Purchase Gain of $434Mn arising from the amalgamation of RJR and 1834 Investments.
• Revenues for the quarter declined by 0.2% yoy to $1.45Bn due mainly to decreases in the Audio/Visual division of $18Mn (-2.9%) and in the Audio division of $4Mn (-1.7%), which was offset by an increase of $19Mn (3.1%) in the Print and Online Division. The nine-month reported revenue was $4.19Bn representing a 2.8% decline relative to the nine months ending December 2021. The Group continued to experience softness in the overall advertising market as businesses continued to be impacted by challenging global and local economic conditions.
• Administrative and selling expenses for the nine months totalled $1.85Bn or 2.2% more than the $1.81Bn for the corresponding period of 2021. Admin costs were higher largely due to increased depreciation charges relating to infrastructure upgrades, 1834 operating costs for December 2022 and one-off consultancy costs. Elevated sales costs resulted from higher distribution-related costs. 
• RJR stock price has decreased by 18.4% since the start of the calendar year. The stock closed Tuesday’s trading session at $1.89 and currently trades at a P/E of 12.9x, which is above the Main Market average of 12.2x.
• RJR has been making continued progress in its digital transformation. The Broadcast division has installed new NextGen TV transmission in Kingston and St. James and continues to expand Over The Air coverage islandwide for the proper functioning of HD TV services. This will improve the quality of their content, making RJR the preferred choice for audio/visual, print, and online services, ultimately driving revenues.

(Sources: JSE & NCBCM Research)

• The unemployment rate for Q3 2022 was 5.4%, similar to the corresponding quarter of 2021 but higher than the 4.5% recorded in the second quarter of 2022, according to the Central Bank’s economic bulletin.
• Additionally, the economic bulletin reported that data published by the Central Statistical Office (CSO) indicate that real GDP expanded by 6.6% (year-on-year) during the second quarter of 2022 and the non-energy sector was strong at 10.5%, while the energy sector declined by 2.5%.
• However, driven by external and domestic supply-side factors, the economic bulletin outlined that headline inflation accelerated during the second half of 2022 to 8.0% (year-on-year) in November 2022 (the highest rate since late 2014) compared to 4.9% in June. Core inflation increased to 6.6% while food inflation jumped to 13.8% in November 2022 from 4.1% and 7.8%, respectively in June 2022.
• Overall, GDP is estimated at 1.9% in 2023 by Fitch. The latest CSO data showed that economic activity was clearly on the rebound and is likely to be fueled by growth in construction, food and beverage manufacturing, trade and repairs, transport and storage, professional services and most importantly, the energy sector.

(Source: CariCris)

• Fitch Solutions forecasts a 4.0% real GDP growth for the Bahamas in 2023, down from the estimated growth of 8.1% in 2022.
• Economic growth in 2022 was mainly driven by the tourism sector’s recovery from the main impacts of the COVID-19 pandemic. Total tourist arrivals were up by 278.5% y-o-y for January-November 2022, as pandemic-era restrictions were eased. This translated into stronger service exports, as well as private consumption, as labour market conditions improved. 
• However, growth will slow from 2022 levels due to strong base effects and slowing global growth, as well as elevated inflation, which will weigh on real household disposable incomes.
• Notably, high energy prices will prevent a larger contribution to growth from private consumption. That said, private consumption is expected to add 3.2% to headline growth in 2023 according to Fitch’s forecasts, significantly down from an estimated 9.0% contribution in 2022.
• Additionally, given that the housing and fuels component of the Bahamas’ consumer price basket comprises over 45% of the total, this will continue exposing the Bahamas to elevated global energy prices resulting from the ongoing impacts of the war in Ukraine.
• Consequently, growth is forecasted to slow further to just 2.6% in 2024, with real GDP set to return to pre-pandemic levels and economic activity to settle on a slower long-term trajectory.

(Source: Fitch Solutions)

• The pace of consumer price increases eased again in January compared with a year earlier, the latest sign that the high inflation that has gripped Americans for nearly two years is slowly easing.
• At the same time, Tuesday’s consumer price report from the government showed that inflationary pressures in the U.S. economy remain stubborn and are likely to keep prices elevated well into this year. Rising costs will also keep pressure on the Federal Reserve to raise its benchmark interest rate further and to keep it there through year’s end.
• Consumer prices climbed 6.4% in January from a year earlier, down from 6.5% in December. It was the seventh straight year-over-year slowdown and well below a recent peak of 9.1% in June. Yet it remains far above the Federal Reserve’s 2% annual inflation target. On a monthly basis, consumer prices increased 0.5% from December to January, much higher than the 0.1% rise from November to December. More expensive gas, food, and clothing drove up last month’s figure.
• The data show that while inflation is fading, it is likely to do so slowly and unevenly. Many economists expect inflation to fall to roughly 4% later this year. But it could plateau at that point so long as hiring and wage gains remain vigorous. The Fed might then feel compelled to keep borrowing rates high well into 2024 or even raise them further this year.

(Source: AP News)

• The European Union’s executive branch has raised its economic growth forecast for the year, saying Europe will narrowly avoid a recession and has already passed its inflation peak as natural gas prices fall from astronomical highs. But the European Commission warned Monday that the high prices plaguing consumers will keep holding back the economy for months to come.
• Growth for 2023 should reach 0.8% for the 20 EU countries that use the euro currency, the commission said in its winter economic outlook. That is an increase from 0.3% expected in the last outlook from November. Getting credit for the improvement was the high level of natural gas storage that has alleviated fears of energy rationing over the winter. European utilities and governments raced to line up new supplies after Russia cut off most natural gas deliveries to Europe amid the war in Ukraine.
• The economy is expected to avoid a contraction in the current January-to-March quarter, the commission said. Coming after growth of 0.1% in the final three months of last year, that indicates there won’t be a technical recession as was once feared.
• Headwinds to the economy are strong, the commission said in its report. Energy costs and consumer prices are still high even after three straight months of decline in annual inflation from the 10.6% peak in October to 8.5% in January. On top of that, the European Central Bank is sharply raising interest rates to contain inflation, a step that dampens growth by raising the cost of borrowing for consumers and businesses.

(Source: AP News)