• Jamaica is set to receive a substantial financial boost of approximately $255Mn through its participation in the International Monetary Fund’s (IMF) Resilience and Sustainability Facility (RSF). While an agreement has been reached at the staff level, it remains subject to approval by the IMF Executive Board at its meeting scheduled for February 2024. Once approved, the funds will become accessible to Jamaica.
• IMF recently completed its Article IV review for the year 2024, a significant milestone for Jamaica’s economic prospects. During this process, a dedicated team, led by Esteban Vesperoni, engaged in a series of meetings held in Kingston and conducted a virtual mission with Jamaican authorities from January 8 to 18.
• Commending Jamaica on its notable accomplishments, Esteban Vesperoni highlighted that over the last few years, the country has successfully reduced public debt, anchored inflation, and strengthened its external position. He further stated that “supported by strong revenues and strict control of non-wage spending, a prudent fiscal stance continues to support a reduction in public debt, which is expected to reach 72% of GDP in FY2023/24—the lowest in 25 years—well below pre-pandemic levels.”
• The IMF’s assessment highlights Jamaica’s substantial progress in executing its policy agenda, both under the Precautionary and Liquidity Line and the Resilience and Sustainability Facility. Notably, both facilities received approval from the IMF’s Executive Board in March 2023, with a combined access limit of approximately US$1.732Bn.
• Finance Minister Dr. Nigel Clarke emphasized the significance of the latest review, stating, “The IMF staff press release confirms that Jamaica’s economy is on firm footing and our economic programme is achieving its targets and objectives.”
• The highlighted indicators underscore the country’s strong economic position and commitment to sound financial management.

(Sources: IMF & Caribbean National Weekly)

• On January 15, 2024, the Senior Minister in the Office of the President with Responsibility for Finance, Dr Ashni Singh announced a $1.146Trn national budget for Guyana’s development in 2024. This has thus far been the largest budget in the country’s history, representing a 46.6% increase from the $781.9Bn 2023 budget.
• Notably, the oil and gas sector’s contribution to the country’s developmental thrust in 2024 will increase by 91.9% from the 2023 figure. This implies that while $125.1Bn from oil revenues supported the national budget in 2023, this year, $240.1Bn from the Natural Resource Fund will be used to cushion the trillion-dollar budget.
• The oil and gas industry has benefited the country’s economic development significantly, both by the direct increase in revenues through earnings from Guyana’s profit shares, as well as the economic boom that was triggered by the emergence of the sector.
• For context, from 2015, the year of the first oil discovery, to 2024, the national budget has increased by over 518% (the 2015 budget was $221Bn).
• Over the last several years, the increasing budget has resulted in tangible infrastructural benefits for Guyanese through the injection of oil revenues into infrastructural development, such as improved roads, healthcare facilities, and upgraded utilities. These transformative investments will continue to benefit the quality of life of Guyanese while also increasing the country’s investment prospects.
• Guyana is poised to become a major player in the global energy landscape, cementing itself as a beacon of progress and prosperity. With continued financial backing from the oil sector, the momentum is expected to continue throughout 2024.

(Source: CariCris)

• Fitch Solutions has marginally revised its 2024 growth forecast for Barbados from 2.9% to 3.1% on the back of a brighter US growth outlook, which will lift tourist arrivals and demand for goods exports.
• While this forecast still implies that real GDP growth will decelerate noticeably from its 2023 estimate of 6.3%, largely due to base effects. The economy is projected to have returned to its pre-pandemic size in 2023 and, as such, will no longer benefit massively from post-COVID normalisation going forward.
• That said, final consumption will continue to benefit from falling inflation, a low unemployment rate, and strong growth in public sector wages. Furthermore, the upward revision is underpinned by stronger-than-anticipated external demand from source countries (US and UK). 
• Risks to the growth projections for Barbados stem from the FY2024/25 budget – which is yet to be released, and dramatic changes to the US and UK growth outlooks.  

(Source: Fitch Solutions)

• Corporate debt defaults increased significantly in 2023, reaching 153 compared to 85 the previous year, marking an 80% rise. This trend poses a potential concern for 2024, as financially strained companies grapple with the challenges of high-interest rates, according to a report by S&P Global Ratings.
• A substantial portion of the defaults originated from low-rated companies facing negative cash flows, high debt levels, and weak liquidity. Consumer-facing industries, notably media and entertainment, played a prominent role in the increased default rate.
• Corporate debt in the United States has surged to USD 13.7 trillion, rising by 18.3% since 2020. This escalation occurred as companies took advantage of the Federal Reserve's interest rate cuts during the early stages of the Covid-19 pandemic.
• S&P Global Ratings anticipates further global credit deterioration in 2024, particularly for lower-rated entities ('B-' or below). The firm expects financing costs to remain high despite potential rate cuts. A significant portion of speculative-grade debt is projected to mature in 2025 and 2026, potentially contributing to a "corporate debt cliff."
• The economic slowdown and increased financing costs could lead to more widespread defaults, affecting sectors beyond media and entertainment, including consumer products, retail, and health care. Further, while Fed rate cuts are expected to provide some relief, elevated rates are likely to persist through 2024. Market expectations suggest a substantial cut in short-term rates, but Fed officials have hinted at a more gradual approach depending on inflation data.

(Source: CNBC)

• It is a close call whether the Bank of England starts trimming borrowing costs next quarter or in July-September, with only a slim majority of economists expecting it to do so before July as inflation falls towards its target. That is a turnaround from a December poll when more than two-thirds of respondents expected no move until at least the third quarter, as inflation is now seen falling faster.
• Inflation surged to a 41-year high of 11.1% in late 2022 and has proved tricky to tame even though the BoE raised interest rates 14 times from December 2021 to August 2023, taking the Bank rate to a 15-year peak of 5.25%.
• In December, inflation sped up for the first time in 10 months, rising to 4.0% from November's more-than-two-year low of 3.9%, denting market expectations for an early rate cut. The December poll indicates that the Bank of England (BoE) was initially expected to make its first interest rate cut in the third quarter, aligning with global trends seen in the U.S. Federal Reserve and the European Central Bank.
• Respondents, anticipating a Q2 cut, favour May over June due to its alignment with the second-quarter monetary policy report. Analysts, such as Marc Ostwald at ADM Investor Services, emphasize the importance of evaluating underlying economic trends.
• Inflation is projected to drop below target to 1.9% in the next quarter, providing the BoE with room to consider policy easing. The majority of economists foresee a Bank Rate reduction by the third quarter, aiming for 4.25% by year-end. The UK economy is expected to navigate challenges, with a forecasted growth of 0.1%-0.2% per quarter in 2024 and a more optimistic 1.2% growth in 2025.

(Source: Reuters)

• The Jamaica Stock Exchange (JSE) has issued an advisory to the public that it has decided to immediately suspend trading in iCREATE Limited’s (ICREATE) shares due to its failure to comply with the requirements of the JSE Junior Market Rule.
• This is in keeping with the provisions of JSE Junior Market Rule 505 – Ongoing Requirements, Section 14 – Delisting or Suspension 14 (a) (i).
• It states that “The JSE may, in its absolute discretion, delist or suspend trading of the admitted participating voting shares and other admitted securities of a Junior Market Company if the Junior Market Company fails or ceases to comply with any of the requirements of the Admission Agreement, or any of the statements made in the Declaration for Admission, or this Rule 505;”
• The company's trading activities were also suspended in August 2023 for failing to submit its audited financial statements on time.
• The notice of suspension will remain in force until iCREATE has responded to the satisfaction of the JSE to all matters concerning its compliance with the JSE Junior Market Rules.

(Source: JSE

• During the fourth quarter of 2023, Jamaica's Consumer Confidence Index hit 174.7 points, the highest level since 2019 and an 8.5% gain over the previous quarter.
• Don Anderson, CEO of Market Research Services, highlighted that the spike in the consumer confidence index indicates that consumers are perceiving a return to pre-pandemic conditions, with significant changes in business and work conditions expected over the next year.
• In contrast, local businesses appear to be less optimistic about their profits improving in 2024. The Index of Business Confidence reported a decrease between Q3 and Q4 from 144.7 points to 139.1 points, reflecting a change of -3.9%. This change is due to declines in firms’ financial standing and profit performance between quarters.
• Similarly, the index of business conditions, which constitutes thoughts about the climate for investment/expansion, as well as the performance in the firms’ profitability, remained relatively stable in Q4. The proportion of firms that are convinced it is a good time to invest dipped to 53% in Q4, down from 57%. The proportion of firms that reported that profits are better than expected was stable at 26% compared to 25% in Q3. Compared to Q4 2022, the index of current business conditions recorded a small negative change of -1.6%.
• Despite different confidence trends, businesses and consumers remain concerned about crime and violence, which they see as a substantial obstacle to Jamaica's prosperity.

(Source:  Jamaica Conference Board)

• The Panama Canal's toll revenues have dipped by about $100Mn per month since last October, the canal's administrator said on Wednesday, January 17, adding that if the trend continues, reduced income from tolls could total some $700Mn by around April.
• The falling revenue stems from drought conditions that have forced the canal's managers to impose shipping restrictions on the more than century-old waterway. A crucial global trade route linking the Pacific and Atlantic Oceans.
• Canal Administrator Ricaurte Vasquez described the continued trend of falling toll revenue in coming months as "possible", in comments to reporters at a press conference.
• He added that the waterway is expected to meet targets set out in its budget for income for the fiscal year, in part due to a recent toll increase that has come into effect.
• The canal's fiscal year begins in October and runs through September.

 (Source: Reuters)

• In September, a group of Brazilian farmers and officials arrived in the Peruvian fishing town of Chancay. The draw: a new Chinese mega port rising on the Pacific coast, promising to turbocharge South America's trade ties with China.
• The $3.5Bn deep water port, set to start operations late this year, will provide China with a direct gateway to the resource-rich region of South America. Over the last ten years, Beijing has unseated the United States as the largest trade partner for South America, devouring its soy, corn, and copper.
• The port, majority-owned by Chinese state-owned firm Cosco Shipping, will be the first controlled by China in South America. It will able to accommodate the largest cargo ships, which can head directly to Asia, cutting the journey time by two weeks for some exporters.
• There are hopes for Chancay to become a regional hub, both for copper exports from Peru as well as soy from western Brazil, which currently travels through the Panama Canal or skirts the Atlantic before steaming to China.
• Peru's government is planning an exclusive economic zone near the port and Cosco wants to build an industrial hub near Chancay to process raw materials that could include grains and meat from Brazil before shipping them to Asia.
• Brazil's ambassador in Peru, Clemente Baena Soares, said there were plans for meetings between officials early this year to seek to resolve logistical, sanitary, and bureaucratic hurdles at the border so Brazilian trucks can more easily reach the port.

 (Source: Reuters)

• Workers in Europe are hoping this year's pay round will help restore incomes eroded by higher prices, but the expected boost to their purchasing power could hamper the European Central Bank's efforts to bring inflation back to target.
• The ECB has singled out wages as the single biggest risk to its 1.5-year crusade against inflation. It expects salary growth across the eurozone of 4.6% this year, far more than the 3% pace it considers consistent with inflation at its 2% target.
• Higher wage settlements would be a risk to interest-rate cuts that financial markets are betting will start in April. Pay hikes increase costs for firms and boost household income, both factors that might push up prices and require the ECB to keep rates high.
• "We see a path to 3% (wage growth) but it will be a bumpy road," Reamonn Lydon, an economist at the Central Bank of Ireland and one of the minds behind the popular Indeed Wage Tracker, said in an interview.
• Unions see a combination of gradually cooling inflation, low unemployment, and fat corporate profit margins as their best and possibly last shot at restoring workers' living standards in this economic cycle.

(Source: Reuters)