• Fitch Solutions has revised its 2023 growth forecast for Costa Rica from 2.9% to 3.2%, and is now projecting growth to slow to 2.5% in 2024.
•  The latest national accounts release shows that real GDP in Q123 performed better than initially expected, growing 4.5% y-o-y. This was underpinned primarily by a strong performance in exports, which grew by 15.8%, while private consumption and fixed investment both grew by 3.0%.
• Fitch’s upward revision is also supported by a strong performance of leading indicators in Q223. Expansions in the Monthly Index of Economic Activity (IMAE) have been accelerating in the last three months, with the latest growth rate coming in at 7.4% y-o-y in May.
• This is likely impacted by the Banco Central de Costa Rica’s (BCCR) dovish monetary policy stance, having already implemented three rate cuts since March 2023 as inflation has cooled sharply.
• The fixed investment will likely accelerate in the months ahead, while private consumption growth will remain fairly robust, further supporting growth in H223 and 2024 and adding to Fitch’s upward revision for 2023.
• That said, the deceleration in headline growth vis-à-vis H123 will be driven by softer export demand induced by the weakening of US growth in 2023 and 2024.
• Costa Rica’s key trading partner is the US, which serves as a destination for half of the market’s goods exports. Costa Rica also relies on the US as a source of tourists. US growth is projected to slow down from 2.1% in 2022 to 1.6% in 2023 and 0.6% in 2024 with a technical recession likely at the start of 2024, implying softer export demand for Costa Rica in the quarters ahead.

 (Source: Fitch Solutions)

• Sales of pre-owned homes dropped 3.3% in June compared with May, running at a seasonally adjusted annualized rate of 4.16 million units, according to the National Association of Realtors. Compared with June of last year, sales were 18.9% lower. That is the slowest sales pace for June since 2009.
• The continued weakness in the housing market is not for lack of demand. It’s all about a critical shortage of supply. There were just 1.08 million homes for sale at the end of June, 13.6% less than in June of 2022. At the current sales pace, that represents a 3.1-month supply. A six-month supply is considered balanced between buyer and seller.
• “There are simply not enough homes for sale,” said Lawrence Yun, chief economist for the Realtors. “The market can easily absorb a doubling of inventory.” That dynamic is keeping pressure on home prices. The median price of an existing home sold in June was $410,200, the second-highest price ever recorded by the Realtors. Last June’s price was the highest but by barely 1%.
• Sales are unlikely to recover anytime soon, as mortgage rates weigh heavy on affordability. The Realtors measure June sales based on closings, so contracts that were likely signed in April and May. Mortgage rates hung in the mid-6 % range during that time and then shot up over 7% at the very end of May. Rates stayed in the 7% range for all of June, as home prices rose.

(Source: CNBC)

• Wheat prices rose sharply Monday following a strike by a Russian drone on a Ukrainian port on the Danube River.
• Moscow’s drones attacked Ukraine’s port infrastructure overnight, targeting the country’s grain stocks, the Ukrainian Army said. One grain silo at the Reni port was hit and substantially damaged, according to geolocated images and video.
• Wheat futures on the Chicago Board of Trade jumped 8.5% to $7.57 a bushel, and corn futures rose 4.7% to $5.52 a bushel.
• Traders are concerned about tightening supply following the collapse of the Black Sea grain deal last week and a string of Russian drone attacks on Ukrainian port infrastructure.
• The deal — originally brokered by Turkey and the United Nations a year ago — had ensured the safe passage of ships carrying grain from Ukrainian ports. So far the pact has allowed for the export of almost 33 million metric tons of food through Ukrainian ports, according to UN data.
• Before the war, Ukraine was the fifth-largest wheat exporter globally, accounting for 10% of exports, according to the Organization for Economic Cooperation and Development.
• The White House said the Black Sea deal had been “critical” to bringing down food prices around the globe, which spiked after Russia invaded Ukraine in February last year. The global food price index compiled by the UN’s Food and Agriculture Organization hit an all-time high in March 2022 but has fallen steadily since then.
• Romanian President Klaus Iohannis said in a tweet Monday that the attacks on the ports in the Danube posed “serious risks to the security in the Black Sea,” adding that it would affect Ukrainian “grain transit and thus the global food security.”

(Source: CNN)

• Kingston Wharves Limited (KWL) has signed a 20-year deal with international club shopping company PriceSmart. The arrangement allows PriceSmart to enter a new lease to occupy a portion of KWL's 300,000-square-foot, Integrated Modular Logistics Complex at Ashenheim Road.
• The first phase of the complex is under construction and set for completion in the first quarter of 2024. PriceSmart will have access to the facility at the end of 2023 to complete its build-out.
• The agreement with PriceSmart represents a guaranteed 10-year lease arrangement, with the option of renewal in two five-year increments.
• Kingston Wharves’ CEO Mark Williams says this represents a strengthening of the company's ability to take on nearshoring opportunities. The completed facility will bring KWL's logistics and warehousing capacity to more than 600,000 square feet.
• With PriceSmart being a global brand, a partnership of this magnitude will establish KWL and by extension Jamaica as a more desirable nearshoring destination. Considering this, it could position KWL to take advantage of logistics opportunities that may arise. The logistics market was valued at about US$9.96Trn in 2022 and is expected to reach about US$14.37Trn by 2028. This has the potential to become a key driver of both top and bottom-line growth for KWL going forward.

(Source: RJR)

• Minister of Finance and the Public Service, Dr. the Hon. Nigel Clarke, on Tuesday (July 18), tabled the Second Supplementary Estimates for fiscal year 2023/24 in the House of Representatives. The primary objective of the Estimates is to reallocate to individual heads the required funds to enable payment of the compensation adjustments during the fiscal year.
• In December 2022, the Government commenced implementing the Public Sector Compensation Restructure, which is still underway. Dr. Clarke informed that given the effective implementation date of April 1, 2022, and the fact that discussions with some unions continued into the current fiscal year, it was not possible to incorporate these adjustments at the beginning of the 2023/24 fiscal year to facilitate payment of the second-year compensation restructure amounts.
• Due to this, an estimated amount for the second-year payments was captured in the Contingency funds of the Ministry of Finance and the Public Service. He further indicated that several entities are also being allocated one-off grants or additional subventions, to enable them to meet the compensation restructure payments.
• Clarke noted that the Second Supplementary Estimates, therefore provides for the transfer of $14.8 billion from the contingency allocation under the Ministry of Finance and the Public Service to several ministries, departments and agencies (MDA) Heads for the compensation of employees. The Estimates also provide for the addition of $8.9 billion to recurrent programmes, primarily to facilitate other compensation restructuring payments.
• Under recurrent programmes, the Second Supplementary Estimates also reflect the $2.7 billion in value of equipment, including taxes paid on that equipment donated by the People’s Republic of China. It also reflects $5.6 billion in loans to public bodies comprising working capital support of $5 billion to Petrojam and $600 million to the Sugar Company of Jamaica Holdings Limited.
• As a result of this, the Central Government spend for fiscal year 2023/24 is, therefore, now estimated at $1.036 trillion, up from $1.021 trillion. If revenue estimates should remain unchanged, then there could be a downward revision to the fiscal and primary balances for FY 2023/24.

(Source: JIS)

• Fitch Solutions maintains its forecast that Panamanian real GDP growth will slow from 10.8% in 2023 to 5.0% this year, but flags that downside risks to this projection are rising at the margin.
• The Q422 national accounts have yet to be released, though the February print of the monthly economic activity was released in mid-June. Growth remained robust at 9.0%, supported by the strength in construction linked to a ramp-up in public investment, ongoing recovery in the tourism industry and resilience in consumer-facing services.
• This helped to compensate for weakness in the mining sector linked to a since-resolved dispute between the government and the operators of the important Cobre Panamá copper mine which drove an 11.6% y-o-y decline in exports in Q123 in value terms.
• Furthermore, domestic demand should continue to drive growth this year, supported by loose fiscal policy ahead of next year’s elections and easing inflation.
• On the flip side, ongoing drought – which may be exacerbated by the El Niño weather phenomenon (a warming of the ocean surface, or above-average sea surface temperatures, in the central and eastern tropical Pacific Ocean.) – represents the single largest downside threat to Fitch’s forecast.
• The drought has already led to the introduction of some restrictions on the weight of ships that can pass through the canal, which accounts for roughly 20% of Panama’s service exports per the OECD (Organization for Economic Cooperation and Development). Ships move through the Panama Canal via a lock system, which uses water from several freshwater reservoirs to float the massive cargo vessels overland. Drought affects the water levels of these reservoirs and by extension ships traversing the key global trade route.
• Persistent drought could also create some energy challenges, given that hydroelectricity accounts for roughly 70% of the country’s electricity needs.

(Source: Fitch Solutions)

• A plan to deliver internet connections to low-income Caribbean households has been unveiled as part of a private-public partnership between leading telecoms operator C&W Communications and some Caribbean countries.
• Termed JUMP, the initiative aims to help bridge the digital divide and foster greater digital inclusion in a region that still has less than 65% broadband penetration with 27 million users from a total combined population of 44 million, C&W Communications said in a statement.
• In partnership with local governments, the company, which is the operator of Flow, Flow Business, C&W Business and BTC, will provide qualifying households with a subsidised high-speed internet connection, a free laptop computer and relevant training for individuals and families.
• So far, C&W Communications and the governments of Barbados, Grenada, Jamaica, St Lucia, and The Bahamas have committed to JUMP and more than 2,700 households have already been connected.
• According to the C&W CEO, Inge Smidts, the aim is to eliminate barriers and to ensure that every individual and family, despite their financial situation, can benefit from the digital world.
• “We believe this investment will change lives, unlock the potential of economies, and truly enable progress. Our core social mission is to connect everyone to the digital world, regardless of their income or where they live, and we are committed to harnessing our resources and capabilities to narrow the digital divide,” she said.

(Source: Trinidad Express Newspaper)

• China on Wednesday pledged to make the private economy "bigger, better and stronger" with a series of policy measures designed to help private businesses and bolster the flagging post-pandemic recovery.
• Weak growth in the world's second-largest economy has created an urgency to revive the private sector, a key growth driver that has been bruised by COVID-19 curbs and a wide-ranging regulatory crackdown that targeted sectors from technology to property.
• China will strive to create a market-oriented first-class business environment, state news agency Xinhua said, quoting guidelines published by the Communist Party and the cabinet. "The private sector is a new force to promote Chinese-style modernisation, an important foundation for high-quality development and a key force to promote China's comprehensive construction of a socialist modern power," Xinhua said.
• The measures include protection for the property rights of private firms and entrepreneurs and steps to ensure fair market competition by breaking down market-entry barriers. They will also create a "traffic light" system to make clear the areas in which private investors are able to invest, as well as encourage some private companies to issue technology innovation bonds.
• Authorities have started to reverse some restrictive policies on tech and property sectors to try to boost the economy, with policymakers holding a series of meetings with companies from sectors ranging from tech to modern logistics to try and increase confidence.
• China is also encouraging private enterprises to increase investment in research and development and participate in investment and construction of new types of infrastructure.

(Source: Reuters)

• Netflix said Wednesday that its quarterly revenue and subscriptions rose, as efforts to curb password sharing took hold. The streaming giant said it added 5.9 million customers during the second quarter amid its broader crackdown on password sharing in the U.S. Netflix said it would roll out its new policy to the rest of its customers on Wednesday.
• The company reported revenue of $8.20 billion, up 3% from $7.97 billion in the prior-year period. Net income of $1.49 billion climbed from $1.44 billion in the previous corresponding quarter. The earnings report comes soon as investors look for more information on the rollout of Netflix’s ad-supported streaming tier and account-sharing crackdown.
• However, Netflix said it was too early to report a breakdown of revenue from the ad-supported tier — which was introduced late last year — as well as the accounts that have come from the new sharing policy.
• Netflix said Wednesday it expects a boost in revenue in the second half of the year as it begins to see the full benefits of paid sharing plus the steady growth in the ad-supported plan.
• Netflix said it now forecasts revenue of $8.5 billion, up 7% year-over-year, for the third quarter. It attributed the expected revenue growth to more average-paid memberships.
• The company also anticipates paid net subscriber additions in the third quarter will be similar to the second quarter. Meanwhile, Netflix expects revenue growth in the fourth quarter to “accelerate more substantially” as the efforts to curb password sharing gain steam and as advertising revenue grows.

(Source: CNBC)

• For June 2023, the All-Jamaica Consumer Price Index (CPI) increased by 1.0% when compared to the previous month. The point-to-point inflation rate for the month was 6.3%, indicating that inflation has accelerated slightly over the last month.
• This upward movement was influenced by an increase of 1.3% in the index for the heaviest-weighted division, ‘Food and Non-Alcoholic Beverages’. Additionally, the inflation rate for June was also influenced by the divisions, ‘Restaurant and Accommodation Services’ up by 4.2% and ‘Furnishings, Household Equipment and Routine Household Maintenance’ increasing by 6.4%. The inflation rate was, however, tempered by a decline of 0.8% in the index for the ‘Housing, Water, Electricity, Gas and Other Fuels’ division due to the reduction in the rates for electricity, water and sewage.
• The point-to-point inflation rate (June 2022 – June 2023) was 6.3%. This was influenced mainly by the point-to-point inflation rate for the divisions: ‘Food and Non-Alcoholic Beverages’ (10.3%), ‘Restaurants and Accommodation Services’ (12.8%) and ‘Furnishings, Household Equipment and Routine Household Maintenance’ (11.4%). For the fiscal year-to-date the inflation rate was 1.6%.
• The chief contributor to the rise in the point-to-point index for the division ‘Food and Non-Alcoholic Beverages’ was the class ‘Vegetables, tubers, plantains, cooking bananas and pulses’, which increased by 23.4%. A 12.9% rise in the index for the group ‘Food and Beverage Serving Services’ was the primary factor that influenced the increase in the index for the division ‘Restaurants and Accommodation Services. Additionally, the ‘Furnishings, Household Equipment and Routine Household Maintenance’ was impacted by a 14.0% increase in the index for the group ‘Goods and Services for Routine Household Maintenance’.
• The overall point-to-point inflation rate was tempered by the fall in the index for the ‘Transport’ division, a result of lower cost for fuels, with the index for the class ‘Fuel & lubricants for personal transport equipment’ decreasing by 13.0%.
• On June 29, 2023, the BOJ held its monetary policy meeting, where it was deemed appropriate to maintain the policy rate at 7.0% and watch the pass-through effects on deposit and loan rates. Point-to-Point inflation is projected to continue to fall and enter the BOJ’s target range of 4.0% to 6.0% by the December quarter. The next policy decision will be on the 19^th of August; it is expected that BOJ will maintain its policy rate at 7.0%. 

(Source: STATIN)