• The Bank of Jamaica (BOJ), in a statement released on February 23, noted that upon review, it recognised that it had overestimated the impact of the reduction in JUTC fares on inflation and that it took full responsibility and apologised for the error.
• In early November 2023, the BOJ shared its concern about projected inflation with the Minister of Finance and the Public Service, Hon. Nigel Clarke, highlighting that inflation was projected to rise above the target range over an extended period, driven largely by the public passenger vehicle (PPV) fare increases announced by the Government on October 10, 2023, which would take effect in October 2023 (19%) and April 2024 (16%).
• It also shared with the Minister at that time an estimate of the cumulative impact of the increases in PPV fares as contributing approximately two percentage points to annual inflation and advised the Minister of its estimate of required reductions in JUTC fares to cushion the impact of the announced PPV fare increases.
• Subsequently, on 21 November 2023, the Minister announced in Parliament the temporary two-phase reduction in JUTC fares to support BOJ’s inflation targeting mandate. However, Governor Byles noted that the BOJ had overestimated the effect of the fare reduction, which had an offsetting impact of only 0.2%.
• Jamaica’s higher-than-targeted headline inflation of 7.4% in January 2024, which exceeded the Bank’s target of 4.0% to 6.0%, contributed to the Monetary Policy Committee’s (MPC) decision to maintain the policy interest rate at 7.0%.

• As a result of the above-noted price shocks, inflation is now projected to track above the Bank’s target range between the March 2024 and June 2025 quarters.

(Source: BOJ)

• The Ministry of Economy, Planning, and Development (MEPyD) reported that monetary poverty decreased by 4.7% in 2023. In the Dominican Republic, the official measure of poverty has been monetary poverty, which considers only household income. In this sense, households defined as poor under this methodology are those that are below the poverty line in the country (RD 7,645.3 – 2023 poverty line per person).
• According to the 2023 Bulletin of Official Monetary Poverty Statistics in the Dominican Republic, in 2023, national monetary poverty significantly decreased from 27.7% in 2022 to 23.0% in 2023, indicating positive progress in improving the general economic conditions of the population compared to 2022.
• The publication stated that the decrease in general poverty in the country was mainly female and rural. Poverty in rural areas decreased from 30.9% to 24.6%; meanwhile, poverty in urban areas decreased from 27.0% in 2022 to 22.7% in 2023. The percentage of women in monetary poverty decreased 5.3 percentage points to 24.1% in 2023, whereas the reduction for men was 4.0 percentage points, from 25.8% in 2022 to 21.8% in 2023. Extreme poverty also improved 0.6 percentage points from 3.8% in 2022 to 3.2% in 2023.
• The main determinants for the decline in poverty were said to be the control of inflation, along with the increase in employment and labour income favoured by a notable generation of more formal jobs.
• Notably, in 2023, the nominal per capita household income reached RD15,906 pesos (approximately US$270.65), representing an increase of 16.2% when compared to 2022. Likewise, the real per capita household income increased by 11.7% compared to 2022.
• This improvement in household income translates to a higher standard of living for locals, supported by the likelihood for greater consumption and the ability for locals to effectively meet basic needs.

(Source: The Dominican Republic’s Ministry of Economy, Planning, and Development)

• Panamanians will go to the polls on May 5, 2024, bringing to an end President Laurentino Cortizo’s (who is constitutionally barred from running) five-year stint in office.
• Cortizo's tenure has been a turbulent period for Panama. Nationwide protests broke out in both 2022 and 2023, nominally driven by the public’s frustration with cost-of-living pressures (2022) and concerns over the environmental impact of the Cobre Panamá mine (2023).
• However, the root cause of both bouts of social unrest was due to the lack of opportunities available to the bulk of Panamanians, who lack the skills to find work in the thriving professional services sector.
• That said, while the presidential contest itself is hard to call, the outlook for policy looks less uncertain. The race itself is wide open, but the implications for policy continuity are unlikely to be very significant, with the majority of candidates committed to a pro-business agenda.
• While the outlook appears positive for business in the near term, Fitch is sceptical that the electorate will be happy to persist with the status quo. Until the employment issue is resolved, it is expected that social tensions will remain elevated and that large, nationwide protests will become a more frequent phenomenon in the coming years.

(Source: Fitch Solutions)

• Despite ambitious environmental goals, Europe struggles to match the economic growth of the United States over the past two decades. The EU faces issues like chronic under-investment, an aging population, and obstacles in the free flow of labor, capital, and goods.
• Former ECB chief Mario Draghi proposes solutions involving a low cost of capital, rule adjustments favoring innovation, and necessary state aid to overcome hurdles. The emphasis is on rapid investment to restructure supply chains and decarbonize economies.
• The EU estimates indicate a requirement of 650Bn euros annually until 2030 and 800Bn euros annually thereafter until 2040 for private investments. The goal is to close the technology gap with the U.S., foster green energy sectors, and reduce reliance on imported chips.
• The EU faces challenges in implementing a capital market union due to resistance from member countries protecting their interests. Even if achieved, it won't be a cure-all for the EU's competitiveness issues, as reflected in rankings and concerns about high electricity costs. Policymakers stress the need for private investment, raising questions about the sustainability of businesses dependent on subsidies.

(Source: Reuters)

• The volume of goods moving through Spain's top ports rose by as much as 25.0% in January as attacks on shipping in the Red Sea caused companies to divert Europe-bound vessels around southern Africa instead.
• Spain's northern ports have also seen volumes in transit jump by up to triple as traders opt to avoid moving goods by truck through Europe because of widespread blockades by farmers, Spanish retail and food industry association Aecoc says.
• Ports such as Las Palmas in the Canary Islands and Barcelona saw a 25.4% and 7.6% increase in the volume of merchandise, respectively, during the first month of 2023. Overall traffic of goods to Spanish ports - including merchandise, bulk liquids, and dry bulk - increased by 3.4% in January compared to a 3.3% decline in traffic last year, according to official figures.
• Spanish ports are important entry points to Europe for shipping companies that opt to sail around southern Africa rather than through the Red Sea to avoid attacks by Houthi rebels of Yemen. The increase in traffic may be linked to the effects of the Red Sea crisis, the state-run ports agency told Reuters, but it would have to wait some months for a more accurate assessment.
• Volumes of merchandise in transit increased by 2.8% in Spanish ports, but the rise is even more evident in northern Spanish ports such as Santander and Bilbao, which in the first 30 days of the year, handled between two and three times the volume of goods in transit compared to January 2022. The rise in volumes in Santander is also due to an expansion of the port's container terminal, its press office said.

(Source: Reuters)

• Despite a record breaking H1 2023-24 revenue performance, Fontana reported a 2.2% decline in net profit relative to H1 2022-23.
• Revenue grew 9.4% (or $353.84Mn) to $4.13Bn due to stronger sales boosted by the successful launch of its Portmore store just before the busy Christmas season. Growth in key metrics such as transaction counts and average spend per customer also contributed to the higher revenue.
• In line with revenue growth, cost of sales increased by 9.5% (or $222.91Mn) YoY, which translated to a marginal 0.06 percentage points decrease in gross margin. However, Fontana is expected to see eventual improvements in gross margin as it continues to capitalise on economies of scale in its procurement and the efficiencies from its new point of sale system to reduce costs.
• That being said, the overall effect of revenue growth was tempered by a 16.7% (or $159.79Mn) increase in operating expenses to $1.11Bn, driven primarily by administrative expenses, which grew by 20.9% (or $186.35Mn) to $1.08Bn. Expenses related to the opening of its new Portmore location, higher staff costs, increases in security costs, and insurance rates all contributed to the higher admin expenses. However, the impact of these increases on operating expenses was tempered by a 40.4% reduction in selling and promotion expenses.
• Of note, as of January 2024, Fontana has entered into its 6th year of trading on the Jamaica Stock Exchange, which means that it will now be required to pay 50% of the income tax levied on corporations as per JSE rules for junior market companies. This is expected to translate into higher tax expenses going forward.
• Fontana’s stock price has decreased by 1.10% since the start of the calendar year. The stock closed Wednesday’s trading session at $9.90 and at that price trades at a P/E of 19.4x, which is above the Junior Market Distribution Sector Average of 16.6x.

(Sources: Company Financials & NCBCM Research)

• The Planning Institute of Jamaica (PIOJ) is reporting that the economy grew by an estimated 1.9% year-over-year for the December 2023 quarter. Speaking during the PIOJ’s quarterly briefing on February 21, Director General, Dr. Wayne Henry, said the out-turn for the review quarter largely reflected the impact of higher levels of employment, increased productive capacity in the mining and quarrying industry and an increase in consumer confidence associated with the perceived favourable prospects for job opportunities.
• The Goods Producing Industry grew by an estimated 2.3%, driven by improved performances in three of the four industries – Agriculture, Forestry and Fishing; Mining and Quarrying; and Construction. The agriculture, forestry and fishing sector grew by 2.4%, due to an increase in hectares reaped and higher output per hectare for five of nine domestic crop groups. Real value added for the Mining and Quarrying Industry also rose by an estimated 23.6%, reflecting an expansion in alumina production as crude bauxite output declined.
• Real value added for Construction was estimated to have expanded by 1.4%, primarily due to increased supplies of cement and asphalt, as well as higher sales from firms operating within the sector. However, the overall pace of growth was stymied by a 27.8% decline in housing starts by the National Housing Trust (NHT) as well as a 2.4 percentage points decrease in the value of mortgages distributed by the entity.
• However, the Manufacturing Industry contracted by 0.3%, stemming from lower outputs in the sub-industries – Food, Beverages & Tobacco, and Other Manufacturing.
• Overall, the country’s short- to medium-term economic prospects are positive. Economic growth is anticipated for the remainder of fiscal year 2023/24. For the January to March 2024 quarter, it is projected that the economy will grow within the range of 1.5% to 2.5%, resulting in a fiscal year growth (April 2023 to March 2024) within the range of 1.5% to 2.5%.
• However, this outlook is consequent on the continued growth in the economies of Jamaica’s main trading partners, which augurs well for increased external demand in areas like tourism.

(Sources: JIS & PIOJ)

• Trinidad and Tobago has hired two remediation and salvage firms to help clean up an ongoing oil spill off Tobago and salvage the leaking barge, the country's Ministry of Energy said this week.
• It has been almost two weeks since the oil spill was first discovered off Tobago's Atlantic coast after a barge ran aground on a reef. The spill has entered the Caribbean Sea, threatening nearby Venezuela and Grenada.
• "An international partnership comprised of T&T Salvage LLC and QT Environmental Inc, both subject matter experts and licensed oil spill removal organizations, has been engaged on-water oil recovery, survey, and plans to conduct cargo lightering and wreck removal," the ministry said.
• Tobago officials stated that the barge, which was being towed by a tug boat when it went aground, carried as much as 35,000 barrels of fuel oil.
• Several beach and golf resorts in Tobago popular with foreign tourists have closed access to the ocean. The nearby Scarborough cruise ship port is also being protected from the spill by containment booms.

(Source: Reuters)

• The European Union (EU) removed the Bahamas, Belize, Seychelles, and Turks and Caicos from its tax havens blacklist on Tuesday, February 20.
• The EU list of non-cooperative jurisdictions for tax purposes was established in December 2017. It is part of the EU’s external strategy on taxation and aims to contribute to ongoing efforts to promote tax good governance worldwide.
• Concerning the Bahamas and Turks and Caicos Islands, since October 2022, deficiencies in the enforcement of economic substance requirements have been identified in both of these jurisdictions by the OECD Forum of Harmful Tax Practices (FHTP).
• In the FHTP’s most recent assessment, the recommendations to both jurisdictions to remedy these deficiencies were converted from “hard” to “soft” recommendations, which allowed the Code of Conduct Group to consider these jurisdictions compliant with the standard for jurisdictions with no or only a nominal corporate income tax.
• That said, the list, approved by the EU's member states, now counts 12 jurisdictions deemed non-cooperative for tax purposes, particularly when it comes to sharing tax information. The remaining jurisdictions are American Samoa, Anguilla, Antigua and Barbuda, Fiji, Guam, Palau, Panama, Russia, Samoa, Trinidad and Tobago, US Virgin Islands and Vanuatu.
• This EU list of non-cooperative tax jurisdictions (Annex I) includes countries that either have not engaged in a constructive dialogue with the EU on tax governance or have failed to deliver on their commitments to implement the necessary reforms.

(Source: Council of the EU and the European Council)

• The number of Americans filing new claims for unemployment benefits unexpectedly fell last week, suggesting that job growth likely remained solid in February. Initial claims for state unemployment benefits dropped 12,000 to a seasonally adjusted 201,000 for the week ended Feb 17, the Labour Department said on Thursday. Economists polled by Reuters had forecast 218,000 claims for the latest week.
• Claims are hovering at historically low levels, despite high profile layoffs at the start of the year. Difficulties finding labour during and after the COVID-19 pandemic have generally left employers reluctant to reduce head count. Worker productivity has also increased while the economy continues to expand despite hefty interest rate increases from the Federal Reserve.
• Minutes of the U.S. central bank's Jan. 30-31 meeting published on Wednesday showed officials continued to view the labour market as "tight," but several "noted that recent job gains were concentrated in a few sectors, which, in their view, pointed to downside risks to the outlook for employment."
• The claims data covered the period during which the government surveyed businesses for the nonfarm payrolls component of February's employment report.

(Source: Reuters)