• Fitch forecasts Costa Rican real GDP growth will decelerate from 4.3% in 2022 to 2.8% in 2023 due to a challenging near-term US growth outlook – Costa Rica’s key export partner.
• Much of the deceleration will be driven by net exports, which will now contribute just 0.3 percentage points (pp) in 2023 compared to 3.1pp in 2022.
• The US is Costa Rica’s most important trading partner, typically serving as a destination for just under half of Costa Rica’s total goods exports and well over half of the country’s total annual visitors. The anticipated slowdown in the US will feed through to less growth in both goods and services exports in the months ahead.
• That said, domestic demand will keep headline growth roughly in line with the 10-year historical average (3.1%) as both inflation and unemployment fall.
• Furthermore, Fitch expects fixed investment growth will pick up on the back of the Banco Central de Costa Rica’s (BCCR) recent rate cuts.
• Fitch sees fairly sizable risks that the mild recession in the US could take place at the start of 2024 instead of Q423, in which case the drop in external demand for Costa Rica would be shallower than Fitch initially anticipate.  

(Source: Fitch Solutions)

• During the Sixth Meeting of the Forum of the Countries of Latin America and the Caribbean on Sustainable Development currently underway in Santiago, Chile, Senior Finance Minister, Dr Ashni Singh, said Guyana reaffirms its commitment to Agenda 2030, both in terms of the country’s national policy agenda and ‘our call to action by the international community’.
• This 2030 Agenda for Sustainable Development is a plan of action for people, the planet and prosperity. It seeks to strengthen universal peace in larger freedom through 7 Sustainable Development Goals and 169 targets.
• The Senior Finance Minister was part of the panel that addressed ‘Strategies to Advance Implementation of the 2030 Agenda for Sustainable Development in the Caribbean’. He took the opportunity at the forum to highlight two particular strategies to advance the national and sub-regional agenda in a manner fully consistent with Agenda 2030.
• “These most recent economic developments have placed Guyana in a position to accelerate the implementation of Agenda 2030, to which we are firmly committed. Indeed, even the most cursory examination of our successive national budgets in recent years will indicate very close alignment between national policy priorities and Agenda 2030,” the Minister posited.
• Guyana is currently spearheading CARICOM’s Food Security Agenda ‘25 by 2025’, which seeks to reduce CARICOM’s food import Bill by 25 per cent by 2025. The country has also outlined its second-generation Low Carbon Development Strategy (LCDS) as a successor to the first LCDS.
• “We in Guyana are under no illusion of the magnitude of the task before us if Agenda 2030 is to be successfully implemented. Indeed, notwithstanding our relatively strong fiscal position, the successful implementation of Agenda 2030 will require a level of investment that exceeds the still limited fiscal resources available. The challenge of financing sustainable development is further compounded when our inherent vulnerability especially to climate change and other external shocks is taken into account,” the Senior Finance Minister explained.

(Source: Guyana Chronicle)

• Canadian inflation excluding food and energy costs is expected to remain above 3% until the fourth quarter of this year, the median forecast of seven economists recently surveyed by Reuters showed, which could dash hopes of an early Bank of Canada shift to cutting interest rates.
• While Canadian inflation has cooled in recent months, much of the relief has come from lower energy prices, a volatile component that the BoC tends to exclude when making policy decisions. The readings for core, or underlying, inflation, such as the widely-tracked Consumer Price Index excluding food and energy, are showing greater persistence than the headline rate after price pressures spread from goods into slower-moving items, such as wages and services.
• "We suspect they (BoC) will only start trimming rates when they are convinced underlying inflation trends are set to move below 3%," said Doug Porter, Chief Economist at BMO Capital Markets. A lengthy period of high rates could force an increasing share of highly-indebted Canadians to reset their mortgages at levels that squeeze their finances. Canadians added record amounts of mortgage debt during the COVID pandemic, while the mortgage cycle is relatively short - typically five years versus 30 years in the United States.
• The BoC expects headline inflation to hit 3%, the top of its 1%-3% target range, by the middle of this year. Which is down from 4.3% in March. The BoC's ultimate destination for inflation is set at 2%. Still, the rise in inflation expectations could be another reason for the Canadian central bank to be cautious about easing rates. "Even if inflation expectations come back to 2%, they might not be anywhere near as anchored as they used to be," said Stephen Brown, senior Canada economist at Capital Economics. The BoC has played down the market's pricing of interest rate cuts in 2023 and said it is prepared to tighten further if needed to restore price stability.

(Source: Reuters)

• Investors are positioning for a regime change in global markets as the Bank of Japan (BOJ) edges closer to ditching the policies that depressed the yen for decades, thereby luring Japanese money back home.
• The BOJ, by flooding its financial system with cheap cash and keeping interest rates below zero for years, turned its currency into the ideal funding vehicle and sent trillions of dollars of Japanese cash overseas in search of better returns.
• It is now the last holdout in the global race to raise rates, but with Japanese inflation at multi-decade highs, the yen has steadily strengthened. That means portfolio managers are having to factor a stronger yen into global stock selection in a way they have not for years, with some even anticipating mergers and acquisitions as the Japanese market revs up.
• "The trigger for the revaluation of the Japanese markets is higher rates and then a stronger yen. It’s a market that has been undervalued for years and years and has been a value trap," said Carmignac's head of cross-asset Frederic Leroux.
• With Japanese inflation at its highest in four decades, excluding energy, the BOJ may consider ending its yield curve control (YCC) policy - through which it keeps long-term interest rates ultra-low by buying Japanese government bonds (JGBs) - sometime this year. "We are about to see a repatriation of assets back into Japan, and the numbers are really quite big," said Sam Perry, a senior investment manager at Pictet Asset Management. "This reversal could be really quite dramatic."

(Source: Reuters)

• The Global Digital Services Sector (GDSS) accounts for approximately 70% of businesses operating in the special economic zones (SEZs), making it the largest stakeholder group. This information was shared by Chief Executive Officer (CEO) at the Jamaica Special Economic Zone Authority (JSEZA), Kelli-Dawn Hamilton at a recent Jamaica Information Service (JIS) ‘Think Tank’.
• Hamilton highlighted that while the Authority has many roles to fulfil, a major focus is being placed on the GDSS, particularly relating to business process outsourcing entities. It was also highlighted that JSEZA has been collaborating with the Global Services Association of Jamaica (GSAJ) to ensure competitiveness.
• Topics such as artificial intelligence, metaverse, developments affecting the Internet of Things, Big Data, robotic process automation, and logistics will be discussed during the Outsource2Jamaica Conference slated for May 10 and 11 at the Jewels Grande Montego Bay. The conference will be held under the theme ‘Ahead of the Curve’.
• The BPO sector is regarded as one of the fastest-growing sectors and is important to the Jamaican economy because of its ability to provide sustainable jobs. Moreover, the sector has been pumping roughly US$890Mn (J$136Bn) into the Jamaica economy annually, which is equivalent to around 6% of GDP.
• The Special Economic Zone Authority will continue to discuss with the GSAJ, Port Authority of Jamaica, and Jamaica Promotions Corporation (JAMPRO) the next step for Jamaica to remain competitive in the global space as the shift to digital services continues.

(Source: JIS News)

• Local investors and manufacturers, particularly those in agro-processing, are being encouraged to capitalize on the benefits to be derived from the recently launched hot pepper value chain project.
• The initiative, titled ‘Improving Phytosanitary, Food Safety and Market Access Opportunities along the Hot Pepper Value Chain in Jamaica,’ evolved from a strategic collaboration with the United Nations Food and Agriculture Organization (FAO) and the Jamaican Government through the World Trade Organization (WTO) Standard and Trade Development Facility (STDF).
• It aims to strengthen Jamaica’s international competitiveness in the hot pepper industry and stakeholders’ technical and resource capabilities to have consistent local and international market access. Additionally, the project seeks to support sustainable and resilient practices within the sector. Minister of Industry, Investment and Commerce, Senator the Hon. Aubyn Hill noted that the project will result in greater market access and expanded trade.
• Referencing an FAO report, the Minister said data over the past five years indicate a 39 per cent growth in local production levels within the sector.
• Consequently, Senator Hill noted that all stakeholders must continuously seek to capitalize on market access opportunities and meet product demand, to maximize local exports and grow Jamaica’s economy.

(Source: JIS News)

• The average price of food and non-alcoholic beverages increased by 12.99% between March 2022 and March 2023, according to Guardian Media calculations of data published by the Central Statistical Office (CSO) on Sunday. This is lower than the 14.04% registered between February 2022 and February 2023, an indication of an easing in the increase in prices of food and non-alcoholic beverages.
• For the period March 2022 to March 2023, headline inflation was 7.34%; down from the 7.60% recorded in February and the 8.3% in January (year-over-year). Additionally, the food and non-alcoholic beverages decreased from 147.8 points in February 2023 to 146.1 points in March 2023, reflecting a decline of 1.2%.
• The general downward movement in the prices of pumpkin, tomatoes, melon, hot peppers, cabbage, melongene, carrots, pimento, celery, and parboiled rice, contributed significantly to the decline.
• However, this was offset by the general increases in the prices of chilled or frozen beef, fresh beef, chilled or frozen pork, cucumber, onions, oranges, table margarine, grapes, corn, and plantains.
• As inflation continues to become more palatable for consumers (CPI 2023: 4.8% y-o-y), Fitch Solutions expects that the Central Bank of Trinidad & Tobago will continue to leave its policy rate unchanged at 3.5% for the remainder of the year. This is in an effort to support borrowing and the continued post-pandemic economic recovery.

 (Sources: Trinidad and Tobago Guardian & Fitch Solutions)

• Brazil's government announced a package of 13 measures last Thursday to ease consumer access to credit and reduce associated costs in the capital and insurance markets, a move the new leftist administration hopes will boost investment and revitalize a slowing economy.
• Among the measures is the federal government's proposal to provide counter-guarantees for public-private partnership projects at the state and municipal levels. Additionally, the package includes a decree to allow the issuance of bonds with an income tax exemption for investments in sectors such as healthcare, education, and public security.
• According to Treasury Secretary Rogerio Ceron, the move is expected to mitigate financial and political risks seen by private investors, especially foreign ones, attracting funding for projects such as the construction of daycare centres and sanitation facilities, which are dear to the new government of President Luiz Inacio Lula da Silva.
• During a news conference, he announced that the Inter-American Development Bank (IDB) had confirmed the availability of credit lines for operations within this framework. These credit lines are being assessed by development bank BNDES (The National Bank for Economic and Social Development), state-owned Banco do Brasil, and other private lenders.
• Brazil's Secretary of Economic Reforms, Marcos Barbosa, said the measures aim to strengthen the credit market in the long term, paving the way for the country's capital market to become as robust or larger than the $US988Bn banking market.

(Source: Reuters)

• The emerging-markets bloc of Brazil, Russia, India, China and South Africa will meet in Cape Town on June 2-3 to discuss its enlargement, Anil Sooklal, South Africa's ambassador to the group, said in an interview in the city on Monday.
• "What will be discussed is the expansion of BRICS and the modalities of how this will happen," he said. "Thirteen countries have formally asked to join, and another six have asked informally. We are getting applications to join every day."
• China initiated the conversation about expansion when it was BRICS chair last year, as the world's second-biggest economy tries to build diplomatic clout to counter the dominance of developed countries in the United Nations. The proposed enlargement triggered concern among other members that their influence will be diluted, especially if Beijing's close allies are admitted. China's gross domestic product is more than twice the size of all four other Brics members combined.
• The foreign ministers from the five member states have all confirmed they'll attend the discussions in June, Sooklal said. In addition to its membership, they will also discuss "hot spots" including Sudan, where a conflict between the army and a paramilitary force continued for a 10th day on Monday.
• One of the most significant objectives the BRICS nations appear to be working to achieve is a shift away from reliance on the US dollar. Even before the outbreak of war in Ukraine, Russia and China had embarked on clear policies of local-currency promotion, invariably at the dollar’s expense. With more countries anticipated to join the alliance, this could destabilize the dollar as the currency of choice, especially in international trade negotiations.

(Source: The Business Standard)

• Growth in the U.S. slowed considerably during the first three months of the year as interest rate increases and inflation took hold of an economy largely expected to decelerate even further ahead.
• Gross domestic product, a measure of all goods and services produced for the period, rose at a 1.1% annualized pace in the first quarter, the Commerce Department reported Thursday. Economists surveyed by Dow Jones had been expecting growth of 2%. The growth rate followed a fourth quarter in which GDP climbed 2.6%, part of a year that saw a 2.1% increase.
• The outturn in Q1 2023 came on the back of an acceleration in consumer spending, which was offset by businesses cutting back on inventory investment in anticipation of weaker demand this year amid higher borrowing costs.
• The report showed that the personal consumption expenditures price index, an inflation measure that the Federal Reserve follows closely, increased by 4.2%, ahead of the 3.7% estimate. Stripping out food and energy, core PCE rose 4.9%, compared to the previous increase of 4.4%.
• While the economy was not in recession last quarter, the outlook is darkening. Credit conditions have tightened following recent financial market turmoil, which, together with the Federal Reserve's fastest rate hiking cycle since the 1980s, have raised the risks of a downturn by the second half of the year.

(Sources: CNBC & Reuters)