• Following the damage caused by Hurricane Beryl in early July, Fitch Solution is lowering its 2024 real GDP growth forecast for Jamaica from 2.4% to 0.5%. In 2025, Fitch expects that growth will come in at 2.3% – compared to 1.3% between 2015 and 2019 before the pandemic.
• Initial Q2 real GDP growth data has disappointed, coming in at 0.1% y-o-y, according to the Planning Institute of Jamaica (PIOJ). Through H2 2024, Fitch Solution expects quarterly growth to average 0.2% y-o-y driven by a slowing US economy. Given that tourism accounts for around 25% of employment and 30% of GDP, a slowing US economy - a key supply market - will weigh tourist arrivals and visitor expenditure. Fitch Solutions’ views on the US economy are that it will lose momentum around Q4 2024 continuing through early 2025.
• Additionally, weighing on growth in 2024 will be the effects of Hurricane Beryl. The UN found that the hurricane caused US$12Mn of infrastructure damage and US$15.9Mn of farmland damage.
• Notwithstanding the disappointing growth, Fitch Solutions expects that Jamaica’s GDP Growth will rebound in 2025, supported by net exports, contributing 0.8 percentage points (pp) to its growth forecast and a rebounding tourism sector in 2025. As US economic activity increases, Fitch anticipates higher discretionary spending on travel. Consequently, Jamaica is poised to see a significant uptick in tourism arrivals, which will drive growth in the hospitality sector.
• Additionally, the relaxed monetary policy, especially the 50 basis point (bps) reduction by the Fed, is expected to create a favourable global investment climate. Fitch expects this outcome would support a 0.2pp increase in investment to Jamaica as the US economy picks up in H2 2025.
• The risks to the forecast are generally balanced. Fitch maintains its core outlook that the US economy will slow between the second half of 2024 and the first half of 2025. However, there is a possibility that growth could exceed expectations, particularly if there is stronger consumer spending driven by the Fed's easing policies. Should US growth outperform Fitch’s projections, Jamaica is likely to benefit from increased tourism and remittances.
• On the downside, Jamaica, like many other Caribbean nations, faces inherent risks from natural disasters. Coupled with the effects of climate change, an extreme weather event could adversely affect tourism and the manufacturing of export-oriented goods.

(Source: Fitch Solutions)

• Brazil's upgraded credit rating by Moody's highlights that the risk premium in the country’s local yield curve does not reflect its fundamentals and should be reduced, Finance Ministry officials told Reuters on Wednesday, October 2, 2024.
• Tuesday's upgrade to Brazil’s long-term issuer and senior unsecured bond ratings to Ba1 from Ba2, coupled with its Positive outlook meant the country is one notch from regaining investment grade status.
• The upgrade reflects material credit improvements, which Moody’s expects to continue, including a more robust growth performance than previously assessed and a growing track record of economic and fiscal reforms that lend resilience to the credit profile.
• The credit agency also noted that the credibility of Brazil's fiscal framework is still moderate. However, its relatively high cost of debt, robust growth and consistent fiscal policy adherence to the fiscal framework should allow the debt burden to stabilise in the medium term, albeit at relatively high levels.
• Brazil’s positive rating outlook reflects the possibility that steady growth and compliance with the sovereign’s fiscal framework will help enhance institutional credibility and reduce borrowing costs more markedly than currently assumed. 
• Speaking anonymously, a senior ministry official said Moody's action, taken amid strong market scepticism reflected over Brazil's fiscal outlook, would help restore normality. "The revision, together with the maintenance of a positive outlook, should start to encourage non-resident inflows, as they tend to anticipate investment-grade status," the official said. "As it becomes credible that we'll regain investment grade by 2026, the movement should intensify by 2025."

(Sources: Reuters & Moody’s Investor Services)

• The Guyanese government is finalising arrangements to begin making fiscal contributions to the Protected Areas Trust (PAT) Fund, as part of its drive to advance biodiversity protection efforts.
• This was confirmed by Permanent Secretary (PS) of the Ministry of Natural Resources, Joslyn McKenzie, during an address at the PAT’s 10th anniversary celebration. McKenzie noted that the agreement marks the fulfilment of yet another commitment by the government as it seeks to expand the work of the PAT.
• PAT was established in 2014 to fund and manage the National Protected Areas System (NPAS). Through the Protected Areas Commission, PAT supports projects that conserve biodiversity and maintain ecosystem services within Guyana’s protected areas. This is achieved by using revenue from its endowment fund – the Protected Areas Trust Fund (PATF).
• The PATF was originally endowed with US$8.5Mn, but the organisation receives funding from international donors, private sector donations and endowment fund investments, among other avenues. PS McKenzie explained that the government’s financial contribution will advance efforts to double the size of protected areas.
• Of note, during his recent addresses at the United Nations General Assembly and several sideline engagements, President Dr Mohamed Irfaan Ali reiterated Guyana’s commitment to doubling its protected areas by December 2025 and achieving the global biodiversity target of protecting 30 per cent of its land and marine areas by 2030. The permanent secretary reinforced the president’s vision and said that the country is on track to achieving this ambitious target.

(Source: Guyana Chronicle)

• The U.S. central bank's 50 basis-point (bps) interest rate cut last month was an acknowledgement that its policy rate was "out of sync" with where the economy stands, but not a sign that the battle with inflation is finished, Richmond Federal Reserve President Thomas Barkin said on Wednesday. However, President Barkin also said that of a further 50bps Fed cut over the rest of the year further "takes a little bit of the edge off.
• Barkin, a voter on the Fed's interest rate policy this year, supported the 50bps cut delivered by the U.S. central bank on Sept. 18.  The Fed is expected to cut rates by 25bps at its Nov. 6-7 meeting, a move that would lower the benchmark rate to the 4.50%-4.75% range.
• Before that meeting, the U.S. government will have released the employment reports for September and October and inflation data for September. Fed policymakers also will have to assess any fallout from the ongoing port strikes affecting the U.S. East Coast and Gulf Coast, and also the risks inherrent in the intensification of Middle East conflict.
• Barkin said he remains cautious about inflation amid continued strong economic growth, and felt the job market could grow tighter rather than weaker in the months ahead. "There is still work to do on inflation," Barkin said, noting that the personal consumption expenditures price index stripped of volatile food and energy items, or core PCE, is still at 2.7%. He said he does not expect it to decline much more until next year.
• The Fed targets an annual headline inflation rate of 2%. The core PCE figure is considered a guide to how the headline rate will behave in the future. Barkin said that while some aspects of the economy make it seem that "disinflation" will continue, "it remains difficult to say that the inflation battle has yet been won."
• U.S. labour unrest and geopolitical conflicts could push up prices. Additionally, the job market may move in unexpected ways, Barkin said. While much of the Fed's discussion has been about preventing the current 4.2% unemployment rate from rising further, Barkin argued that if the economy continues to grow and demand increases, "employers running lean could well find themselves short" of workers and need to hire.

(Source: Reuters)

• U.S. manufacturing held steady at weaker levels in September, but new orders improved, and prices paid for inputs declined to a nine-month low. The improvement coupled with falling interest rates bodes well for a rebound in activity in the coming months.
• The Institute for Supply Management (ISM) said on Tuesday that its manufacturing Purchasing Managers' Index (PMI) was unchanged at 47.2 last month. A PMI reading below 50 indicates a contraction in the manufacturing sector, which accounts for 10.3% of the economy.
• It was the sixth consecutive month that the PMI remained below the 50 threshold, but above the 42.5 level that the ISM said over time generally indicates an expansion of the overall economy. The survey has, however, exaggerated the weakness in manufacturing, with the so-called hard data, such as factory production and durable goods orders, showing the sector largely moving sideways.
• Gross domestic product data last week showed manufacturing output rising at a 2.6% annualized rate in the second quarter, an acceleration from the 0.2% pace posted in the January-March quarter. Further gains are likely after the Federal Reserve cut interest rates last month for the first time since 2020.

(Source: Reuters)

• Minister of Tourism, Hon. Edmund Bartlett, says Jamaica has proactively prepared its citizens to seize emerging opportunities within the tourism industry. He noted that the ministry has been equipping the populace to take advantage of the myriad opportunities, especially in leadership roles,” he told JIS News.
• The government has implemented a variety of innovative educational programs aimed at enhancing the skills and qualifications of individuals aspiring to occupy senior positions within the sector. “We recognise that a well-trained workforce is essential for the sustainability and growth of our tourism industry. Our educational programmes are designed to empower individuals with the knowledge and skills necessary to excel and lead in this dynamic field,” he said.
• He emphasized that the initiatives undertaken by the Ministry and its public agencies have showcased the transformative potential of tourism, generating opportunities for the population and solidifying Jamaica’s status as a “first-rate and first-choice” destination.
• Additionally, the Tourism Innovation Incubator, established through the Tourism Enhancement Fund (TEF), seeks to identify and cultivate innovative ideas that have the potential to transform Jamaica’s tourism sector. Minister Bartlett noted that this year the program received 222 applications up from the 34 applications submitted in its inaugural year in 2022.
• Growth in the sector is estimated to have decelerated in Q2 2024 to 0.1% from 6.1% in Q1 and it is expected to have weakened in the immediate aftermath of Hurricane Beryl. Despite challenges posed by the hurricane, Jamaica’s tourism sector has shown resilience, welcoming more than 105,000 stopover visitors since the reopening of ports. As such, tourism growth could reaccelerate in H2 amid a favourable revision to the US travel advisory in July 2024, coupled with continued efforts from public and private stakeholders to improve the tourism product and appeal to international travellers.

(Source: JIS & NCBCM Research)

• Monthly output prices for producers in the Mining & Quarrying industry increased by 0.5% for August 2024 relative to July 2024, while prices in the Manufacturing industry fell by 0.7%.
• The upward movement in the index for the Mining and Quarrying industry was attributed to a 0.5% increase in the index for the major group ‘Bauxite Mining & Alumina Processing’. The other major group, ‘Other Mining & Quarrying’, increased by 0.1%. The contributing factor to these increases was the depreciation of the Jamaican dollar relative to the United States dollar.
• On the other hand, a 4.5% decrease in the index for the major category ‘Refined Petroleum Products’—attributed to lower crude oil prices in the international market—was the primary factor behind the decline in the Manufacturing industry index. However, this overall decrease was offset by a 0.1% increase in the index for the major group ‘Food, Beverages & Tobacco.’ This increase was mainly driven by rises in the indexes for the categories ‘Manufacture of Grain Mill Products, Starches and Starch Products’ (0.1%) and ‘Manufacture of Other Food Products’ (0.2%), resulting from general price increases and higher raw material costs.
• For the period August 2023 – August 2024, the point-to-point index for the Mining & Quarrying industry increased by 7.7%, reflecting a similar increase of 7.7% in the index for the major group ‘Bauxite Mining & Alumina Processing’.
• The Producer Price Index (PPI) is a significant economic indicator that tracks the average fluctuation in selling prices that domestic producers of goods and services experienced over time. Currently, the only industries being tracked are Manufacturing Industry and Mining and Quarrying.
• With international oil prices being a key driver of the ‘Refined Petroleum Products’ category, geopolitical tensions could have a material impact on the Manufacturing industry index in the near-to-medium term, if it results in a material rise in oil prices.  
• The impact has been limited since the onset of the Hamas-Israel conflict last year. However, oil prices climbed about 8.3% since Tuesday after Iran fired a salvo of ballistic missiles at Israel in retaliation for Israel's campaign against Tehran's Hezbollah allies in Lebanon. This increase highlights how rapidly escalating geopolitical conflicts in the Middle East can disrupt global energy markets.

 (Source: STATIN & NCBCM Research)

• The Bank of Mexico's governing board may consider larger cuts to its benchmark interest rate going forward as inflation in Latin America's second-largest economy cools, bank governor Victoria Rodriguez told Reuters on Monday, September 30.
• Banxico, Mexico’s central bank, lowered its key rate by 25 basis points (bps) to 10.50% last Thursday, the second consecutive cut as price pressures ease. Banxico previously cut rates by 25 bps in March.
• Banxico will announce its next monetary policy decisions on November 14 and December 19. However, the latest rate cut approved by Banxico's five-member governing board was not unanimous. Deputy Governor Jonathan Heath voted to hold the rate at 10.75%.
• Mexico's annual headline inflation slowed to 4.66% in the first half of September, official data showed, its fourth consecutive fortnight of decline. Core inflation also moderated to 3.95%, its lowest level since early 2021.
• "The adjustment to the inflationary outlook indicates to us that it's appropriate to reduce the level of restrictive monetary policy, though we also recognize we continue to face challenges," said Rodriguez. "The inflation outlook has been improving significantly. Last week, Banxico revised its forecast for annual headline inflation in the fourth quarter slightly downward to 4.3%, from 4.4% previously, while also adjusting its expectations for core inflation to 3.8% from 3.9%.

(Source: Reuters)

• On September 30, 2024, the Honourable Colm Imbert, Trinidad and Tobago’s (T&T’s) Minister of Finance, delivered his tenth National Budget presentation under the theme “Steadfast and Resolute: Forging Pathways to Prosperity”.
• T&T’s projected deficit of TTD5.52Bn continues to be a concern given the still heavy reliance on its energy sector. However, the T&T economy grew by 1.3% in 2023 and 1.9% in 2024. These are promising signs despite a contraction of the energy sector and geopolitical tension, which directly impact local and international trade.
• With revenue projected at TTD54.224Bn and expenditures at TTD59.74Bn, the budget deficit will be TTD5.52Bn based on an oil price assumption of US$77.80 per barrel, a natural gas price assumption of US$3.59 per MMBtu and anticipated oil revenue of TTD14.17Bn.
• Some takeaways from the budget presentation include investments in Health (TTD7.57Bn), followed by education (TTD7.51Bn) and national security (TTD6.11Bn). Additionally, the minimum wage for public sector employees is set to be increased by 9.8% from TTD20.50 to TTD22.50, following a 17.0% increase in January 2024.
• The budget contemplates the phased rollout of property taxes after the suspension of the Land and Building Tax Regime in 2010 and the granting of a Tax and National Insurance (NIS) Amnesty, allowing taxpayers to regularise outstanding tax obligations and ensure compliance. Other takeaways from the budget include plans to issue interest-bearing VAT bonds to alleviate the significant backlog of VAT refunds owed to businesses, and tax-exempting electric vehicle charging equipment and sporting equipment.
• Given the paucity of its proven energy reserves, T&T needs to diversify the economy away from the energy sector. The Minister highlighted diversifying initiatives like expanding trade agreement networks and granting further incentives to propel the agricultural, tourism, manufacturing and other sectors.
• That said, the government continues to rely heavily on the energy sector, despite acknowledging the need to insulate T&T from the volatility of energy sector revenue contributions.
• Overall, the Government is faced with the unenviable task of maintaining economic stability by focusing on, among other things, infrastructural development, security and diversification, while addressing current vulnerabilities.

(Source: PWC)

• Tens of thousands of dockworkers have gone on strike indefinitely at ports across much of the US, threatening significant trade and economic disruption ahead of the presidential election and the busy holiday shopping season. Members of the International Longshoremen's Association (ILA) walked out on Tuesday at 14 major ports along the East and Gulf coasts, halting container traffic from Maine to Texas.
• President Joe Biden has the power to suspend the strike for 80 days for further negotiations, but the White House has said he is not planning to act. The White House said that President Biden and Vice President Kamala Harris were monitoring the strike closely. "The President has directed his team to convey his message directly to both sides that they need to be at the table and negotiating in good faith - fairly and quickly."
• Union boss Harold Daggett has called for significant pay increases for his members, while voicing concerns about threats from automation. He has indicated the union wants to see per-hour pay increase by five dollars per year over the life of the six-year deal, which he estimated amounted to about 10% per year.
• Time-sensitive imports, such as food, are likely to be among the goods first impacted. The ports involved handle about 14% of agricultural exports shipped by sea and more than half of imports, including a significant share of trade in bananas and chocolate, according to the Farm Bureau. Other sectors exposed to disruption include tin, tobacco and nicotine, Oxford Economics said. Clothing and footwear firms, and European carmakers, which route many of their shipments through the Port of Baltimore, will also take a hit.
• More than a third of exports and imports could be affected by the strike, hitting US economic growth to the tune of at least $4.5bn each week of the strike, according to Grace Zemmer, an associate US economist at Oxford Economics, though others have estimated the economic hit could be higher. She said more than 100,000 people could find themselves temporarily out of work as the impact of the stoppage spreads.

(Source: BBC)