• With elections a year away, Fitch expects policy continuity will remain stable throughout the remainder of 2023 in the Dominican Republic.
• The approaching election season, coupled with elevated costs of living, are likely to pressure President Luis Abinader to maintain subsidy spending and work towards raising the minimum wage.
• Abinader has also kept in place popular policies, including the fuel subsidy as well as the strict policy of deporting any undocumented Haitian in the Dominican Republic. While there has been some pushback to the latter on humanitarian grounds, the policy remains popular, especially as Dominicans fear the influx of Haitians will put strains on public services.
• Of note, President Abinader has focused on capital projects for improving and modernising the country’s ecotourism, renewable energy sector, as well as transportation infrastructure. His Modern Revolution Party (PRM) will continue to enjoy a majority coalition in Congress, supporting policy continuity. 
• Given these factors, Fitch has maintained the Short-Term Political Risk Index (STPRI) score at 75.2 out of 100. While inflationary pressures continue to subside, the upcoming election cycle and cost of living crisis will pose some risks to social stability in the short term.
• Last week, Central Bank Governor, Valdez Albizu, delivered a speech to the local banking association hinting that inflation could converge to the target range as soon as this month. In April it had come out at 5.15% (down from 9.6% a year before), while the target band is set at 4% +/- 100bp.

(Source: Fitch Solutions)

• The S&P 500 rose Tuesday after the Biden administration and Republican lawmakers reached a tentative deal on raising the U.S. debt ceiling.
• President Joe Biden and House Majority Leader Kevin McCarthy reached an agreement to raise the debt ceiling and avoid a default over the weekend, with Congress set to vote on the legislation as early as Wednesday. Lawmakers have not signaled that they intended to return to Capitol Hill early to work on the deal. Both Republican and Democratic support is needed for the bill agreement to pass.
• “Although the upcoming votes in Congress still pose a small risk, the main risk had been that political pressures would prevent a deal from coming together,” wrote Goldman Sachs economists in a note. “Now that a deal has been reached, it seems very likely to pass both chambers of Congress in the coming week.”
• The agreement comes just days before the so-called “X date” on June 5, which is the earliest date the Treasury Department has signalled the U.S. could default on debt obligations. The initial compromise was first announced on Saturday evening.

(Source: CNBC)

• Steep competition in the housing market and low supply are heating up home prices again. Nationally, home prices in March were 0.7% higher than in March 2022, the S&P CoreLogic Case-Shiller Indices said Tuesday.
• “The modest increases in home prices we saw a month ago accelerated in March 2023,” said Craig J. Lazzara, managing director at S&P DJI in a release. “Two months of increasing prices do not define a recovery, but March’s results suggest that the decline in home prices that began in June 2022 may have come to an end.”
• Home prices are rising again month to month, however. After seasonal adjustment, prices increased nationally by 0.4% in March compared with February. The 10-city composite gained 0.6% and the 20-city composite rose 0.5%.
• Lazzara also noted that the price acceleration nationally was also apparent at a more granular level. Before seasonal adjustment, prices rose in all 20 cities in March (versus 12 in February), and in all 20, price gains accelerated between February and March.

(Source: CNBC)

• Lighting and energy company, FosRich has established an American subsidiary to explore business opportunities in the United States. FosRich USA, Inc. was registered in Delaware but will be operating out of New York.
• FosRich intends to tap into the minority-owned business market in the USA, where the federal government has set aside US$1 trillion to purchase products and services supplied by the minority-owned business segment. The company plans to take advantage of an infrastructure buildout of bridges and roads, that will be taking place across the US. The company also plans to leverage its relationship with infrastructural giants, Siemens and Philips, to supply directly to these projects, whether they be housing projects, roads or airport expansion.
• The company’s initial target market for its PVC pipes and fittings is the tri-state area of New York, New Jersey, and Connecticut, where these areas have a lot of Jamaicans and a lot of developers that have established strong relationships with Jamaicans. The company is also set up to take advantage of, not only opportunities in the US but also go after similar projects financed by the United Nations in developing countries. The UN procures about US$30.4 billion worth of products and services each year, including pipes like the one's FosRich produces, which provides an opportunity for the company to continue diversifying and increasing earnings.
• With the new establishment of the subsidiary in the United States, Fosrich has access to a larger market. This could be a key driver of growth in the medium term and expectations from management is that the subsidiary could drive between 20 and 30% of the business.
• The notice comes just days ahead of FosRich also indicating that its planned rights issue will be for those on record as owning its shares on June 2. Given that FosRich already raised $369.6 million out of the maximum $500 million allowed for companies listed on the Junior Market of the Jamaica Stock Exchange, the maximum the company can raise is $130.4 million. That said, the difference will go towards paying fees and other costs associated with raising the capital.

(Source: RJR News & Observer)

• An outstanding 2023 summer tourist season is being anticipated for Jamaica as the country prepares to welcome a surge of visitors that would further consolidate the island’s status as a premier vacation destination.
• Acting Deputy Director of Tourism with responsibility for the USA, Canada and Latin America, Philip Rose, told journalists that after wrapping up its best winter tourist season, during the 2022/23 period, Jamaica is forecast for what promises to be its best summer yet.
• He was addressing journalists during the launch of Frontier Airlines’ service between Dallas-Fort Worth International Airport in Dallas, Texas, USA, and Sangster International Airport in Montego Bay on May 22.
• Rose advised that online activities already show increased interest and more air seats secured for travellers looking to come to Jamaica. “We are seeing the online behaviour from the consumers that they want more and more to come to Jamaica. As such, we are very confident that we are going to have a fantastic summer, and beyond,” he further pointed out.
• The new Frontier Airlines flight arriving on May 22, had 92 passengers and a six-member crew. It marked the ninth new flight that Frontier has introduced to Montego Bay, since commencing operations during the COVID-19 pandemic.
• Jamaica continues to benefit significantly from the vibrancy in the tourism industry. Tourism accounts for about 34% of the economic output in Jamaica and 31% of employment in Jamaica and is expected to be a key driver for economic growth this year.

(Source: JIS News)

• The International Monetary Fund (IMF) has advised the Government of Grenada not to continue a tax amnesty programme implemented on 1 January and scheduled to conclude on 31 December 2023.
• “We emphasised several times to the Government that this one should be the last one; it should be very deeply rooted in people’s minds and those who are owing tax to the Government that this should be the last one,” said Huidan Lin, IMF Mission Chief for Grenada, in the just concluded Article IV consultation of the IMF’s Articles of Agreement.
• Both parties (IMF and Govt. of Grenada) asserted that although amnesties are sometimes good, it is not the ultimate solution to the problems that are faced in taxation and thereby cannot offer a permanent remedy.
• The tax amnesty was announced in the presentation of the 2023 budget statement by then Finance Minister Dickon Mitchell. He explained that over EC$777Mn in outstanding taxes are owed, along with late fees, and penalties, and the amnesty is aimed at settling money owing to the Government.
• The IMF has indicated that the Government does not only have to say that there will be no more amnesty, but it also has to step up on enforcement of the Tax Administration law. The efficiency of the tax system can be improved through an update to its tax incentive framework and increased risk-based internal auditing of the customs administration.

(Sources: IMF & Now Grenada)

• Fitch forecasts a fall in Trinidad and Tobago (T&T)’s 2023 and 2024 current account surpluses to 11.2% of GDP and 10.8% respectively, from its 2022 estimate of 18.3%.
• While this marks a fairly sizable fall in the size of the surplus compared to its 2022 estimate, Fitch notes that its forecasts are largely consistent with the 10-year (2012-2021) average historical surplus of 7.8%. 
• This will be the result of a narrower surplus in the goods trade, as global energy prices fall from a multi-year high recorded in 2022. Energy products typically account for four-fifths of T&T’s goods exports, making the trade balance highly susceptible to changes in global energy prices.
• The services trade deficit, meanwhile, will decline as tourist arrivals continue to approach pre-pandemic levels.
• International tourist arrivals have yet to reach the pre-pandemic (2017-19) average of 32,186 monthly visitors, having averaged only 18,874 in 2022 according to the UN World Tourism Organization (UNWTO). This indicates that tourist arrivals still have room to continue growing in 2023 and 2024, though Fitch notes that the pace of such recovery will face headwinds stemming from slow growth in tourist-origin markets like the US. 
• Despite the lower current account surplus, Fitch asserts that risks to T&T’s external position are small given its position as a net creditor to the rest of the world and adequate foreign reserves.

(Source: Fitch Solutions)

• A handful of hard-right Republican lawmakers said on Monday they would oppose a deal to raise the United States' $31.4 trillion debt ceiling, in a sign that the bipartisan agreement could face a rocky path through Congress before the U.S. runs out of money next week.
• Florida Governor Ron DeSantis, a candidate for the Republican 2024 presidential nomination, said the deal does not do enough to change the fiscal trajectory. "After this deal, our country will still be careening toward bankruptcy," he said on Fox News. Still, backers predicted it would clear Congress before the United States runs out of money to pay its bills, which the Treasury Department says will happen on June 5.
• The 99-page bill would suspend the debt limit through Jan. 1, 2025, allowing lawmakers to set aside the politically risky issue until after the November 2024 presidential election. It would also cap some government spending over the next two years. While some panel members have come out in disagreement with the bill, top congressional Republican Kevin McCarthy states that it will draw on the support of most Republicans who control the House of Representatives.
• Representative Raul Grijalva, a progressive Democrat, spoke out in reference to an element of the bill that would speed up the permitting process for some energy projects. The bill would also claw back unused COVID-19 funds, and stiffen work requirements for food aid programmes for poor Americans. It would shift some funding away from the tax-collecting Internal Revenue Service, though White House officials say that should not undercut enforcement in the near term.
• Republicans have argued that steep spending cuts are necessary to curb the growth of the national debt, which at $31.4 trillion is roughly equal to the annual output of the economy. Interest payments on that debt are projected to eat up a growing share of the budget in the decades to come as an ageing population pushes up health and retirement costs, according to government forecasts.

(Source: Reuters)

• Warmer weather usually boosts restaurant sales, but diners may hold back for the second straight summer as inflation weighs on consumers’ minds — and wallets. “I think operators are still hopeful for a good summer boon in foot traffic and sales, but I think on the consumer side, they’re more hesitant.” said Huy Do, Research and Insights Manager at market research firm Datassential.
• Last year, consumers pulled back on their restaurant visits in May, June and July amid inflation concerns. Salad chain Sweetgreen said its sales slowed after Memorial Day and blamed the trend on a range of factors, including erratic returns to offices and surging summer travel. Chipotle told investors that its sales decelerated starting in late May, citing the broader economy, its new workforce and a return to normal seasonal fluctuations in college towns. And ShakeShack said its June sales disappointed as lower-income consumers visited less frequently.
• Inflation may be easing this year, but prices are still rising, adding to worries about regional bank failures and a potential recession before year-end. According to a University of Michigan consumer survey, U.S. consumer sentiment fell to a six-month low in May, fueled by concerns about the debt limit standoff.
• Roughly a third of consumers surveyed by Datassential plan to dine out less over the next month, and about half plan to maintain their restaurant-spending habits. Despite diners’ caution, restaurants are optimistic that they’ll still see a summer boom. Nearly half of the operators surveyed by Datassential anticipate higher sales or improved traffic this summer season.
• Companies based in the US restaurant Industry may experience less than ideal results this summer as inflation continues to weigh on consumer spending. As a result, consumers may opt to substitute eating out for dining in.

(Source: CNBC)

• For April 2023, output prices for producers in the Mining and Quarrying industry decreased by 1.4%, while for the Manufacturing industry, prices increased by 0.3% as indicated by the Statistical Institute of Jamaica (STATIN).
• The decline in the index for the Mining and Quarrying industry was due mainly to a downward movement in the index for the major group ‘Bauxite Mining & Alumina Processing’. The index for the other major group, ‘Other Mining & Quarrying’ decreased by 0.3%. These decreases were influenced mainly by the appreciation of the Jamaican dollar vis-à-vis the United States of America dollar over the review period.
• For April 2023, the index for the Manufacturing industry increased by 0.3%. The main contributor was an increase of 1.8% in the index for the major group, ‘Refined Petroleum Products’. The highest weighted major group, ‘Food, Beverages & Tobacco’, registered a negligible increase in its index. The industry’s increase was however tempered mainly by declines in the index for the major groups, ‘Chemicals and Chemical Products’ (0.2%) and ‘Rubber & Plastic Products’ (1.0%).
• The negligible increase in the index for the major group ‘Food, Beverages & Tobacco’ was mainly due to the major group, ‘Manufacture of Grain Mills Products, Starches and Starch Products’ and was the only group to register an increase in its index of 0.8%. The indices of all other groups declined. Additionally, the index for the ‘Refined Petroleum Products’ major group increased by 1.8% due to higher prices for some petroleum products.
• For the period April 2022 - April 2023, the index for the Mining & Quarrying industry fell by 5.2%. This decline was attributed to a decrease of 5.5% in the index for the major group 'Bauxite Mining & Alumina Processing’. The point-to-point index for the Manufacturing industry increased by 2.8%. This was mainly due to the increase of 8.1% for the ‘Food, Beverages & Tobacco’ major group. The industry’s movement was however moderated by the 15.1% decline in the index for the major group ‘Refined Petroleum Products
• PPI, which measures the average change over time in selling prices received by domestic producers of goods and services. Despite a slight decrease in the index in April, the decision by OPEC+ to cut oil supply could lead to further increases in prices for producers from increased transport and electricity costs.

(Source: STATIN)