• Sri Lanka has reached a preliminary agreement with the International Monetary Fund (IMF) for a loan of about $2.9 billion, the global lender said on Thursday, as the country seeks a way out of its worst economic crisis in decades.
• The agreement, which Reuters first reported on Wednesday, August 31, 2022, is subject to approval by IMF management and its executive board and is contingent on Sri Lankan authorities following through with previously agreed measures.
• IMF conditions for the loan also include receiving financing assurances from Sri Lanka's official creditors and efforts by the country to reach an agreement with private creditors. Its programme, spread over four years, will aim to boost government revenue, encourage fiscal consolidation, introduce new pricing for fuel and electricity, hike social spending, bolster central bank autonomy and rebuild depleted foreign reserves. The country's reserves stood at $1.82 billion as of July, according to central bank data.
• "The programme aims to reach a primary surplus of 2.3% of GDP by 2024," it added. Once the IMF package is approved, Sri Lanka is also likely to receive further financial support from other multilateral creditors.

(Source: Reuters)

• GraceKennedy (GK) has confirmed that it has come to an agreement with the Bank of Nova Scotia to acquire 100% of Scotia Insurance Caribbean Limited (SICL), with the associated transaction being subject to regulatory approvals and other customary closing conditions.
• SICL will be the newest member of the GraceKennedy Financial Group, which comprises GK Life Insurance Eastern Caribbean Limited, GK General Insurance, Key Insurance, Canopy Insurance, Allied Insurance Brokers, GK Insurance Eastern Caribbean, GraceKennedy Remittance Services, GraceKennedy Money Services Group, GK Capital Management and First Global Bank.
• The announcement comes exactly one year after GK acquired another Bank of Nova Scotia subsidiary, Scotia Insurance Eastern Caribbean Limited (SIECL), in August 2021, which was subsequently rebranded under the name GK Life Insurance Eastern Caribbean Limited (GK Life).
• Like GK Life, SICL is a licensed life insurance company, which offers credit protection to customers on personal loans, residential mortgages, personal lines of credit, and personal and small business credit cards. SICL currently operates in Barbados, Belize, British Virgin Islands, Cayman Islands and Turks & Caicos Islands.
• GK Group CEO Don Wehby, commented on the development, “The acquisition of SICL is another step in the fulfilment of our strategy to grow GK’s insurance business in the Caribbean as we continue to expand the footprint of our Financial Group in the region. Along with last year’s acquisition of SIECL, the addition of SICL, and the five territories where it operates, will mean that we have expanded GK’s life insurance business to a total of 13 markets in less than two years.”
• This acquisition will enhance GraceKennedy’s geographical diversification, which bodes well for the company’s revenue growth and profitability over the coming quarters.

 (Source: JSE)

• Minister of Tourism, Hon. Edmund Bartlett, says the sector is recovering at a faster than anticipated pace. The Minister was addressing a town hall meeting hosted by the Tourism Enhancement Fund (TEF), at the Alterry Beach Club, at Priory Beach in St. Ann, on August 28.
• Thus far, in a recent mid-year review in Ocho Rios it was disclosed that to date, the country has had 1.7Mn visitors that spent just a little under US$3Bn. Based on the outturns for the year-to-date period, the sector is now trending 90% against 2019.
• “When you look at what we are doing you will see that in 2019, we earned US$3.6Bn for the entire year, and we have gone only eight months in this year and we are now at the edge of US$3Bn,” he pointed out.
• The Minister noted that 2022 predictions indicate that visitors will spend over US$4Bn and that would easily be a 15 to 20% increase from 2019.

(Source: JIS News)

• The St. Lucia government says it is anticipating investments in the tourism industry to surpass EC$320Mn as a result of negotiations with various investors during the first eight months of this year.
• According to Prime Minister Pierre, “Investors are showing high confidence and interest in St. Lucia’s economic prospects, evidenced by the level of tourism investments recorded for January to August 2022.” Pierre said during that period Cabinet approved 20 projects for tourism incentives “amounting to projected investments of EC$326.6Mn.”
• Tourism officials said that visitor expenditure post coronavirus (COVID-19) pandemic had exceeded EC$560Mn last year and hotels and other properties collectively made in excess of EC$303Mn.
• Further, the government indicated intentions to uphold corporate responsibility to treat workers fairly, compensate workers adequately so that every participant can enjoy the benefits of the tourism sector and in return, help to promote and defend the sector.

(Source: Caribbean News Weekly)

• Cleveland Federal Reserve President Loretta Mester said Wednesday, August 31, 2022, that she sees interest rates rising considerably higher before the central bank can ease off in its fight against inflation.
• Mester, a voting member this year of the rate-setting Federal Open Market Committee, said she sees benchmark rates rising above 4% in the coming months. That’s well above the current target range of 2.25%-2.5% for the federal funds rate, which sets what banks charge each other for overnight borrowing but is tied to many consumer debt instruments.
• Markets currently are pricing in only a 1-in-3 chance of the funds' rate climbing above 4% next year. The Fed this year has raised rates four times for a total of 2.25 percentage points. Markets are pricing in a third consecutive 0.75 percentage point increase at the September meeting and looking for rate cuts to start in the fall of 2023.
• Mester said she anticipates the rate increases to slow economic growth, which she sees as running “well below 2%” while the unemployment rate rises and financial markets remain volatile. She expects inflation to fall to a range of 5%-6% this year and then get closer to the Fed’s target in subsequent years.
• In one concession to those looking for lower rates, she said she does not think the Fed necessarily will have to keep raising rates until inflation hits the central bank’s 2% goal. But she said policymakers must remain vigilant.

(Source: CNBC)

• China's factory-gate inflation eased in July to a 17-month low, defying global cost pressures as slower domestic construction weighed on raw material demand, although consumer price increases hit a two-year high as pork supplies tightened.
• The producer price index (PPI) rose 4.2% year-on-year, the National Bureau of Statistics (NBS) said on Wednesday, August 31, 2022, versus an uptick of 6.1% in June and analysts' median forecast of 4.8%.
• China's producer price growth has slowed from a 26-year high in October last year, giving policymakers some leeway to stimulate the flagging economy even as central banks elsewhere scramble to hose down rampant inflation with aggressive interest rate hikes.
• The consumer price index (CPI) increased 2.7% from a year earlier, the fastest pace since July 2020, but below forecasts for a gain of 2.9%. The government has set an annual consumer inflation target of about 3%, while Premier Li Keqiang said last month China would be able to keep the 2022 price rise under 3.5%, in a bid to highlight the need to stabilise prices and employment.
• While China's relatively benign inflation has largely been due to weak domestic demand, a moderation in global price pressures, such as falling oil prices, also contributed to July's slowdown. “Factory gate inflation will remain on a downward trajectory throughout the rest of the year amid a further drop in commodity prices, easing supply bottlenecks and a higher base for comparison," Zichun Huang, China economist at Capital Economics, said in a research note.

(Source: Reuters)

• A total of 1,505 new housing solutions are slated for development in the Corporate Area over the next three years.
• This was announced by Prime Minister, the Most Hon. Andrew Holness, during a handover ceremony for units under phase 1A of the Majesty Gardens housing development in St. Andrew, on August 24.
• Other areas identified for developments are Fore Shore Estate with 230 units; Maxfield Park – 210; and Howard Avenue Apartments, 280 units. These are to be completed in 2023.
• The National Housing Trust (NHT) will partner in this ambitious drive to provide affordable solutions for all Jamaicans. Mr Holness emphasized that communities must be diverse and healthy, both in how people live in them and in the environment.
• However, given the increased cost of borrowing as a result of high-interest rates, it poses a risk of potential delays in some of the planned developments.

(Source: JIS News)

• The National Housing Trust (NHT) has decided to provide interest rate subsidies to middle- and low-income earners as well as persons with disabilities in keeping with the Government’s mandate to make homeownership possible for every Jamaican.
• Mr Holness said the change in its application of additional interest rate subsidies is a fairer and more effective approach, even as the Trust continues to provide greater assistance to those contributors who need it the most.
• “The subsidy is such that if you fall within a certain category, your interest rates are reduced. If you are disabled, and you are in the category of $30,000 to $40,000, you get a 1% reduction in your interest rate, but that category only pays 2%. If you are in the $42,000 and over, you get a 1% reduction, so you pay 3%,” the Prime Minister indicated.
• The NHT has been evaluating how it allocates subsidies. Under the previous approach, additional interest rate subsidies were applied to special groups. This resulted in persons who fell within those groups automatically attaining subsidies – whether or not they were needed to access or afford a loan.
• This change in interest rate subsidies is expected to make homeownership more affordable for low-income earners, especially in light of rising interest rates that have increased the cost of borrowing. This should help to sustain demand in the affordable housing segment of the real estate market.

(Source: JIS News)

• Fitch forecasts that the Peruvian economy will grow 2.7% in 2022, up from the 2.4% previously forecast. While this would make Peru among the fastest-growing economies in Latin America this year, mounting headwinds in H2 2022 will keep growth below the 3.2% average that Peru recorded from 2015-2019.
• Private consumption growth will remain strong in the coming months as a result of easing inflation, falling unemployment, and income support measures. In Q2 2022, private consumption remained robust at 4.6% y-o-y, down slightly from 4.8% in Q1 2022, indicating that consumers were less deterred by rising inflation than previously anticipated.
• Notably, the Agency forecasts that inflation will slow from 8.7% currently to 7.4% by the end of 2022, which will increase purchasing power and private consumption. In addition, a tightening labour market in Q2 2022 will support spending as real wages rise.
• A decline in total exports will be slowed by elevated demand for energy globally, which supported robust natural gas exports and hence growth in recent months. In addition, investment growth will support the expansion. In Q2 2022, investment grew by 2.5% y-o-y, recovering from a 5.5% contraction in Q1, as the Banco Central de Reserva del Peru’s (BCRP) more gradual hiking cycle kept borrowing costs lower.
• However, risks to the growth forecasts remain to the downside. That is, should inflation ease more slowly in the coming months, the BCRP may elect to hike rates beyond its September meeting, tempering private consumption and investment growth. In addition, weaker growth in China could place additional strain on external demand, capping headline growth.

(Source: Fitch Solutions)

• The Economic Commission for Latin America and the Caribbean (ECLAC) has warned of the challenges to be faced by countries in the region as they move to reactivate investment and growth.
• In its latest annual report titled Economic Survey of Latin America and the Caribbean 2022, ECLAC highlighted the trends and challenges of investing for a sustainable and inclusive recovery, in which it projects 2.7% average economic growth for the current year in a context of acute macro-economic restrictions that are hurting the region's economies.
• Mario Cimoli, Acting Executive Secretary of ECLAC noted that “in the context of multiple goals and growing restrictions, there must be a coordination of macroeconomic policies that would support the acceleration of growth, investment, and poverty and inequality reduction, while also addressing inflationary dynamics”.
• The report emphasised that Latin American and Caribbean countries are facing a complex economic outlook in 2022 and in the coming years. Lower economic growth is compounded by strong inflationary pressures, little dynamism in job creation, declining investment and growing social demands.
• This situation has translated into major challenges for macroeconomic policy, which must strike a balance between policies that would drive economic reactivation and policies aimed at controlling inflation and ensuring the sustainability of public finances.

(Source: Trinidad Express Newspapers)