• Real GDP growth in Costa Rica is expected to reach 3.7% in 2022, from 7.6% in 2021. This is an upward revision of the 2022 forecast from 3.0% previously, as growth outperformed expectations in Q2 2022 at 5.4% y-o-y.
• This follows an 8.4% print in Q1 2022, with robust activity in the manufacturing and transport sectors supporting headline growth. In addition, Costa Rica’s tourism sector has seen a rebound in recent months, driven by lower health restrictions and stronger demand for international travel.
• Despite this upward revision, Fitch Solutions maintains its view that growth will decelerate in H2 2022 as unfavourable base effects mount, elevated inflation eats into household purchasing power and tighter monetary policy limits investment.
• In July, inflation reached 11.5% y-o-y, the highest rate since April 2009, largely driven by high food and transport costs. It is expected that global commodity prices will remain well above historical trends through the end-2022 as the Russia-Ukraine conflict continues and supply chain issues linger. 
• Easing inflation and looser monetary policy will support stable growth in 2023, at 3.2%. This is largely in line with pre-pandemic trends, where growth averaged 3.4% from 2015-2019, and will be underpinned by stable private consumption and investment growth.
• The Central bank of Costa Rica (BCCR) will likely ease rates in response to falling inflation, cutting by 150bps to 7.00% by the end of  2023. This will support stronger private consumption and investment growth as purchasing power rises and borrowing costs fall. That said, US growth will slow from 1.8% to 1.6% in 2023, which will limit the upside for Costa Rica’s goods and services export growth.

(Source: Fitch Solutions)

• The Government of Dominica continues to implement measures to keep fuel prices under control as the global price of oil continues to rise.
• Given the present global market prices and this new price cycle, the Government has decided to further subsidize the cost of petroleum to reduce the impact on residents and to allow for sustainable economic activities.
• The government will continue applying a waiver of the Customs Service Charge on gasoline and diesel and the granting of the subsidy of EC$0.21 per gallon on diesel.
• Further, due to a greater increase in the global price for gasoline, the Cabinet approved an increase in the subsidy on this product from EC$0.60 per gallon to EC$0.85 per gallon with immediate effect until the retail price of each product returns to below EC $15.00 per gallon.
• Important to note is that this implementation of the measures will result in continued revenue loss to the state. However, the Government of Dominica remains committed to actions to cushion the impact of escalating world fuel prices and the current inflationary increases affecting basic household items.

(Source: Dominican News Online)

• British consumer price inflation is set to peak at 18.6% in January, more than nine times the Bank of England's target, an economist at U.S. bank Citi said on Monday, raising his forecast once again in light of the latest jump in energy prices. Consumer price inflation was last above 18% in 1976.
• Citi forecasts that the Office of Gas and Electricity Markets (Ofgem) will raise the tariff cap to the equivalent of 3,717 pounds from October, with further increases to 4,567 pounds in January and 5,816 pounds in April 2023. In its forecasts at the start of August, the BoE assumed the cap would rise to around 3,500 pounds in October and that energy prices would then stabilise. Consumer price inflation would thus peak at 13.3% in October.
• With inflation now set to peak substantially higher, the BoE's Monetary Policy Committee was likely to conclude that the risks of more persistent inflation had intensified, Citi said. "This means getting rates well into restrictive territory, and quickly," Nabarro said. "Should signs of more embedded inflation emerge, we think a Bank Rate of 6-7% will be required to bring inflation dynamics under control. For now, though, we continue to think the evidence for such effects is limited."
• The BoE announced a rare half-percentage-point interest rate increase earlier this month and investors expect another big move when the Monetary Policy Committee makes its next scheduled monetary policy announcement on Sept. 15.

(Source: Reuters)

• The Bank of Japan will likely cut its economic forecasts at its next quarterly review in October, as slowing global demand and a resurgence in COVID-19 infections hurt exports and consumption, the bank's former top economist Seisaku Kameda said on Monday, August 22, 2022.
• Japan's economic recovery is at a "critical juncture" as consumption appears to have stalled during the summer, dashing policymakers' hope households will boost spending with savings accumulated during the pandemic, Kameda told Reuters.
• "There's a chance consumption will stall or only barely grow in the third quarter," as a renewed increase in COVID-19 cases and rising living costs hit households, he said. "The economy's recovery from the pandemic may be under threat," Kameda said the Bank of Japan (BOJ) may cut its growth forecast for the fiscal year ending March 2023 to 2% or lower, from the current forecast of 2.4%, made in July.
• On the price outlook, Kameda said Japan's core consumer inflation may briefly reach 3% later this year due to soaring fuel and food costs. While inflation will moderate next year as the effect of energy costs dissipates, it may still hover around the central bank's 2% target longer than expected as companies continue to pass on rising raw material costs to households, he said.

(Source: Reuters)

• Bank of Jamaica (BOJ) announced its decision to increase the policy interest rate (the rate offered to deposit-taking institutions on overnight placements with BOJ) by 50 basis points to 6% per annum, effective August 19, 2022.
• The Bank also decided to continue pursuing other measures to contain Jamaican dollar liquidity expansion and maintain relative stability in the foreign exchange market.
• BOJ has indicated that it has been encouraged by the direction of the last three CPI reports. Having peaked in April 2022, inflation in May and June was 10.9%, followed by a slight decline to 10.2% in July. Declining international commodity prices, relative stability in the exchange rate and higher interest rates, have allowed for this trend.
• The Bank, however, believes that the conditions that led to these outturns have not sufficiently solidified to ensure that inflation is sustainably on a downward path. Should these variables begin to solidify in the near future, the BOJ has stated that it is prepared to pause its monetary policy tightening. 
• Inflation is projected to generally stabilize over the remainder of the year, consistent with the consensus forecast for a fall in commodity prices and the Bank’s overall monetary policy stance.
• Inflation is also projected to fall to single digits in early 2023 and to enter the Bank’s target range by the end of 2023, as long as the conflict between Russia and Ukraine does not escalate and inflation among Jamaica’s trading partners continues to fall.
• The Bank’s current decision has resulted in a cumulative increase in the policy rate of 550 basis points since October 2021, which has taken the policy rate to a level that the Monetary Policy Committee tentatively considers appropriate.

(Source: BOJ)

• According to the Planning Institute of Jamaica (PIOJ), the Jamaican economy reported a 5.7% expansion in GDP for the June quarter relative to the corresponding quarter for 2021. The estimated output in the Goods Producing Industry declined by 0.4%, while the Services Industry increased by 7.7%.
• The performance was premised on a few key factors, including increased employment, both locally and in major trading partners; and greater resumption of tourist, economic and business activities due to the removal of COVID-19 measures.
• The growth in the Services Industry was due to improved performance in all eight (8) industries. However, Hotels & Restaurants led the recovery, registering an increase of 55.4%. The other major contributors to the performance in the Services Industries were Other Services (25.0%), Transport, Storage & Communication (10%) and Wholesale & Retail Trade; Repairs; Installation of Machinery & Equipment (5.8%).
• On the other hand, the performance of the Mining & Quarrying (-60.6%) and Construction (-4.2%) Industries led to the decline in the Goods Producing Industries. This was however tempered by growth in the Manufacturing (2.8%) and Agriculture, Forestry & Fishing (12.6%) Industries. The outturn in the Mining & Quarrying Industry continues to be impacted by the closure of the JAMALCO alumina plant in Clarendon after a fire in August last year. Operations at the plant are however expected to fully resume during the latter part of this fiscal year.
• For the September 2022 quarter, PIOJ anticipates that the Jamaican economy will expand within the range of 2-3%, given a continuation of recovery efforts, reopening of the JAMALCO plant, improved labour market outturns and a strengthening of the global economy, supported by a restoration in global supply chains in key areas such as energy and grains.
• Current projections are that for all quarters of FY2022/23, the country will record higher levels of output relative to the subdued performance in FY2021/22. As such, the PIOJ's projection is for growth in output within the range of 3-5% for the full FY2022/23. It must however be noted that the economy is not expected to attain pre-COVID GDP levels until FY2023/24.
• However, the downside risks to the outlook are the presence of the ever-evolving COVID-19 virus, Monkeypox, and the negative impact of inflation and interest rate challenges on consumers and businesses.

(Sources: PIOJ & NCBCM Research)

• President Luis Abinader affirmed that despite the country facing the highest international inflationary levels in the last 14 years, the government had approved a package of measures and actions to mitigate it to the extent possible without neglecting the leading macroeconomic indicators.
• The President highlighted that the country’s inflation is below the average of the region and other countries of world reference. The low inflation levels have been achieved without increasing the weight of the consolidated public sector debt concerning the Gross Domestic Product and with a reduction of the non-financial public sector debt, which has dropped from 49.7% in August 2020 to 47.5% in June 2022.
• Notably, the country has the highest level of reserves in history with US$14.5Bn, employment levels are higher than in the pre-COVID stage, tourism is experiencing record growth and the free zones will close this year with the best export data in their history.
• Additionally, since the war between Russia and Ukraine began, the government has allocated RD$42.8Bn in a program of subsidies for the protection of the working classes, as well as for the most vulnerable, mainly to subsidize 100% of the increase in fuel prices and directly for fertilizers and other components used in agricultural production.

(Source: Dominican Today)

• Chairman of the Barbados Hotel and Tourism Association (BHTA) Renee Coppin is pinning hopes for improvement in low hotel occupancy levels on Barbados’ ability to attract more airlifts into the island.
• Coppin noted that relative to 2019, the island had experienced a near 60% decrease in airlift for the current summer period, with the resulting decline in tourism arrivals and hotel occupancy.
• Consequently, the organization is of the view that there must be a laser-focused approach to the question of airlift supply for the island, given that the numbers point to being 58.3% down on 2019 levels for the comparable period of June to October 2022. According to Coppin for the summer period airlift is down by almost 60%.
• This was a “particularly critical” issue the BHTA chairman said, “given that many of our sister destinations across the region are not reporting similar levels of decline.

(Source: Nation News)

• Turkey's central bank shocked markets on Thursday, August 18, 2022, by cutting its main interest rate by 100 basis points to 13%, saying it needed to keep driving economic growth despite inflation hitting nearly 80% and a monetary tightening trend among its peers worldwide.
• The lira dropped as much as 1.2% as the bank took its latest step down the unorthodox policy path advocated by President Tayyip Erdogan that aims to provide targeted cheap credit to help boost Turkish exports.
• There had been virtually no signal that another rate cut was in the works and no economist polled by Reuters had predicted one, given that inflation has soared to 24-year highs, eating deeply into Turks' earnings and savings.
• The bank had held its main rate at 14% for the past seven months after cutting it by 500 basis points towards the end of last year. That policy easing sparked a currency crisis in December that sent inflation soaring.
• The rate cuts long urged by Erdogan - who holds sway over the bank after ousting several of its governors in recent years - have left real interest rates in deeply negative territory and have accelerated a cost-of-living crisis for Turkish households. However, the central bank's policy-setting committee said it needed to act because leading indicators pointed to a loss of economic momentum in the third quarter.

(Source: Reuters)

• The U.S. existing home sales fell to a fresh two-year low in July, further evidence that the Federal Reserve's aggressive monetary policy tightening campaign was dampening demand for housing, although home price levels remain high.
• Existing home sales dropped 5.9% to a seasonally adjusted annual rate of 4.81Mn units last month, the lowest level since May 2020 when sales hit their low point during the COVID-19 lockdowns, the National Association of Realtors said on Thursday. Outside the pandemic, sales were the slowest since November 2015. It was the sixth straight monthly sales decline.
• Home resales, which account for the bulk of U.S. home sales, plunged 20.2% on a year-on-year basis. The report came on the heels of data this week showing single-family housing starts, which account for the biggest share of homebuilding, tumbled to a two-year low in July. The National Association of Home Builders/Wells Fargo Housing Market sentiment index fell below the break-even level of 50 in August for the first time since May 2020.
• Mortgage rates, which move in tandem with U.S. Treasury yields, have soared even higher. The 30-year fixed-rate mortgage is hovering around an average of 5.22%, up from 3.22% at the start of the year, according to data from mortgage finance agency Freddie Mac.

(Source: Reuters)