• Climate change could cost Latin America nearly a fifth of its gross domestic product (GDP) by the end of the century without new policies to curb its impact, according to a Moody's Analytics report published Monday.
• The analysis examined three possible scenarios for the region, accounting for the costs of climate change's physical toll (infrastructure damage, poorer health) as well as the costs of policy interventions aimed at reducing climate change.
• Latin America's economic output sustained losses under all three scenarios analyzed, namely, immediate policy actions targeting zero emissions by 2050, policies delayed until 2030 but then picking up pace, and no new policies to curb climate change.
• If no new policy action is taken, Moody's foresees a steady deterioration in GDP, estimating a loss of 10% by 2075 of the regions GDP, and ending the century with an economic decline of 16% as the region loses production capacity starting this year, and losses mount at increasing rates. Under a late policy scenario, Moody's sees output sinking more than 6% lower before recovering to a loss of 5% by 2080.
• "Latin American countries that would be more affected by climate change are the main fossil fuel producers and consumers: Venezuela, Colombia, Brazil, and Mexico," the report said. This is primarily due to the fact that emissions from fossil fuels are said to be the dominant cause of global warming. As a result, the move to cleaner energy will take a huge toll on these producers.
• Early policy implementation presented the best-performing scenario as it reported the lowest losses. It is therefore suggested that countries push towards early climate control implementation policies to reduce future economic output losses and lower inflation from less intensive prices and tariffs.

(Source: Reuters)

• The Bank of Canada on Wednesday left its key overnight rate on hold at 4.50%, as expected, becoming the first major central bank to suspend its monetary tightening campaign in the face of an anticipated easing of high inflation.
• Over the past year, the Canadian central bank raised rates eight times in a row by a total of 425 basis points to tame inflation, which peaked at an annualized rate of 8.1% last year and slowed to 5.9% in January, still almost three times the Bank of Canada's 2% target.
• "Overall, the latest data remains in line with the Bank's expectation that CPI inflation will come down to around 3% in the middle of the year," it said in a statement.
• While some economic data have been particularly strong since the last policy meeting, including a blockbuster January jobs report, gross domestic product stalled in the fourth quarter - far weaker than the 1.3% annualized growth forecast by the BoC.
• The central bank acknowledged that fourth-quarter growth came in below its expectations and dropped language saying the economy was in "excess demand". "Restrictive monetary policy continues to weigh on household spending," the statement said. "With weak economic growth for the next couple of quarters, pressures in product and labour markets are expected to ease."
• The central bank said core inflation measures and short-term inflation expectations still needed to fall in order to return inflation to target. The BoC expects near-zero growth for the first three quarters of 2023.

(Source: Reuters)

• The eurozone failed to register any growth quarter-on-quarter in the final three months of 2022, the European statistics agency said on Tuesday, slightly revising down both its GDP and employment growth numbers, although the latter remained strong.
• Eurozone economic growth was 0.0% in the fourth quarter compared with the third and 1.8% from a year earlier, Eurostat said in a statement. That compared with flash estimates of 0.1% and 1.9% published on February 14.
• The revisions still confirmed that the eurozone narrowly avoided the technical recession that had previously been expected.
• Eurostat also revised down the figure for employment growth in the eurozone to 0.3% quarter-on-quarter from a previously reported 0.4%. The year-on-year number was 1.5%, in line with earlier estimates. This pushed the total number of people with jobs to 165 million, 3.6 million more than at the end of 2019, just before the COVID-19 pandemic struck.
• Strong employment growth highlights how tight the labour market is and signals a problem for the ECB in its fight to bring inflation back to 2% from the double-digit territory last autumn.
• A recession had been expected to boost the jobless rate, cooling the labour market and keeping a lid on wages. But firms, which struggled to rehire workers after the pandemic, appear to be hanging onto staff even through a slowdown.

(Source: Reuters)

• Fitch Ratings has revised the Rating Outlook on Jamaica's Long-Term Foreign and Local Currency Issuer Default Ratings (IDRs) to Positive from Stable and affirmed the IDRs at 'B+'.
• The revision of the outlook reflects Jamaica's significant progress with debt reduction, despite the pandemic shock, its stability-oriented institutional framework and favourable financing conditions, reinforced by the new IMF facilities. Public debt has resumed its declining trajectory following the temporary increase in 2020, to an estimated 85% of GDP at the end of 2022, below its pre-pandemic level, although still much higher than the current 'B' median of 57% of GDP.
• Jamaica's 'B+' rating is also supported by World Bank Governance Indicators that are substantially stronger than the 'B' median. The ratings, however, remain constrained by deep structural weaknesses, including a high crime rate and low productivity reflected in subdued underlying growth potential, estimated between 1-2%.
• Fitch forecasts general government debt-to-GDP will decline to 80% by the end of 2023 and to around 70% in 2026; however, meeting the government's 60% debt target by 2028 looks challenging. Nevertheless, sizeable primary budget surpluses are expected to be the key driver of the debt decline.
• Jamaica has a strong, stability-oriented economic policy framework that is built on two key pillars: the Bank of Jamaica (BOJ) inflation-targeting monetary policy regime and fiscal policy anchored on debt reduction targets. The policy framework proved flexible enough to cope with the double shocks of the pandemic and more recently the exogenous energy and commodity price shocks. The government has built a track record of fiscal prudence that has gained credibility over recent years and it will be further institutionalized by the new independent fiscal commission which will judge the compliance of the draft annual budgets with the fiscal rule.
• A negative rating action could result from a sizeable fiscal deterioration, a marked increase in debt service costs and/or a sizeable external shock that weakens growth and/or external finances, such as a natural disaster or sharp fall in tourism. On the contrary, a positive rating action would result from a sustained decline in the government debt-to-GDP ratio over the medium term and/or enhanced resilience of economic growth without the emergence of macro imbalances and shocks to external finances.

(Source: Fitch Ratings)

• Manufacturing and distribution group Seprod is looking to supply the region with more margarine and is in the process of expanding its subsidiary Caribbean Products Limited to handle the increased production load.
• Over the past eight months, the company has been renovating and upgrading the equipment and is expected to ramp up the new capacity within another month. At that time, Seprod plans to start producing more margarine for sale to the Caribbean region, but it will also be producing the item on behalf of a third party under contract.
• So far, Seprod has spent about US$6 million on the plant. Seprod Group’s CEO Richard Pandohie noted that it is essentially a new margarine plant and is expected to be finished by April. The idea is that Seprod will be co-packing for a major global company while being able to introduce a lot more margarine and butter-type products to the market.
• Caribbean Products is presently capable of producing different types of margarine, inclusive of bulk for the baking and food industry; and hard stick and soft table margarine for home use.
• The disclosure about the plant expansion comes alongside the release of the company's preliminary year-end results for 2022. Profit climbed 93% during the year, from $1.85 billion to $3.84 billion. This was on the back of an 82% increase in revenue to $79.67 billion. The additional $36 billion of sales was mostly related to the consolidation of newly acquired business AS Bryden, a distribution company based in Trinidad & Tobago. The acquisition has essentially doubled Seprod's revenue. Minus the effect of AS Bryden, profit would have grown by 8%. The expansion of the margarine plant is expected to contribute further to the continued improvement of the company’s bottom line.

(Sources: Financial Gleaner & Seprod)

• A stubborn surge of inflation has caused central banks worldwide to adapt monetary policy to protect people and businesses from price increases, with many raising interest rates in step with the U.S. Federal Reserve.
• As countries begin to diverge in strategies, Latin America's top economies are now grappling with decisions on whether to hold or continue hiking their existing rates.
• Brazil's central bank decided at a February meeting to keep its Selic benchmark interest rate at 13.75%. It paused its aggressive tightening cycle in September following 12 straight rate hikes.
• Mexico's benchmark interest rate stands at 11.00% after the central bank increased it by 50 basis points (bps) the second week of February, bringing its rate 700 bps higher than when it began hiking in June 2021. The central bank aims to bring inflation down to 3%, plus or minus one per cent.
• Chile's central bank at its latest meeting, decided to keep its benchmark rate at 11.25%, maintaining the same level since October, when it paused a series of hikes that added up to 1,075 bps since July 2021.
• Peru's central bank maintained its benchmark interest rate at 7.75% in February, unchanged from a 25-bps hike a month earlier. Battling the highest inflation in a quarter of a century, policymakers in the copper-producing nation had raised rates periodically from mid-2021, when the rate stood at just 0.5%. Annualized inflation stood at 8.65% in February, inching slightly below the January figure but still well ahead of the institution's 1% to 3% target range.
• Finally, Colombia's central bank raised its benchmark interest rate by 75 basis points to 12.75% at its latest meeting, bringing its tightening cycle up 1,100 bps since September 2021. In February, the country, which is facing the highest inflation recorded since 1999, posted annualized inflation of 13.28%, far above the bank's 3% target.
• Inflationary pressures are receding and are expected to continue on this trend in many countries due to the early and determined efforts of these central banks as well as lower global prices of food and energy. However, the IMF suggests that Central banks must not weaken their resolve to bring down inflation, as 2023 is still forecasted to be a year of continued economic challenges for the region.

(Source: Reuters)

• Brazil's central bank announced the start of a digital currency pilot project on Monday, March 6, aiming to replicate the success of its instant payment system Pix to popularize financial services in the country.
• According to Fabio Araujo, coordinator of the initiative at the bank, the public’s use of the digital currency should begin at the end of 2024, after the completion of the testing phase - which will include buying and selling of federal public bonds among individuals - and its subsequent evaluation. 
• Araujo stressed that the concept of the Brazilian central bank digital currency (CBDC) was not intended to leverage digital payments, as this is already being done on a large scale with Pix (launched at the end of 2021). But rather bank deposits would continue to exist within the Brazilian CBDC, only being registered in a more modern environment, meaning that financial institutions would not lose this source of funds for credit generation.
• This digital environment is set to reduce the costs of credit, the cost of improving the return on investments and bring the possibility of financial inclusion for people, including great potential for new service providers and fintechs to gain access to the market and offer new services.

(Source: Reuters)

• The Federal Reserve could increase the size of its interest rate hikes and raise borrowing costs to higher levels than previously projected if evidence continues to point to a robust economy and persistently high inflation, Chair Jerome Powell told a Senate panel Tuesday. Such economic figures, Powell said, “have partly reversed the softening trends that we had seen in the data just a month ago.”
• The Fed chair also said that inflation “has been moderating in recent months” but added that “the process of getting inflation back down to 2 per cent has a long way to go and is likely to be bumpy.” Inflation, as measured year over year, has slowed from its peak in June of 9.1% to 6.4%.
• Powell’s comments raise the possibility that the Fed will increase its key interest rate by a half-percentage point at its next meeting on March 21-22, after having carried out a quarter-point hike in early February.
• The Fed chair’s warning of potentially more aggressive hikes led some economists to pencil in higher rates for later this year than they had previously estimated. Rising rates can not only cool consumer and business spending, weaken growth, and slow inflation; they can also send the economy sliding into a recession.
• Additionally, the Fed’s monetary policy report to Congress, which it publishes in conjunction with the chair’s testimony, said that quelling inflation will likely require “softer labour market conditions” — a euphemism for fewer job openings and more layoffs.

(Source: AP News)

• China's exports and imports with Russia surged at a double-digit pace in January-February from a year earlier, customs data showed on Tuesday, as China said it had to advance relations with its northern neighbour in an increasingly turbulent world.
• China's exports to Russia jumped 19.8% in the first two months, to a total of $15 billion, while it recorded shrinking demand from markets elsewhere. Imports from Russia soared by 31.3% to $18.65 billion. That left the world's second-biggest economy's trade deficit with Russia at about $3.6 billion.
• China's seaborne imports of Russian oil are set to hit a record this month after refiners took advantage of cheap prices as domestic fuel demand rebounded following the lifting of COVID-19 curbs, Reuters reported last week.
• Foreign Minister Qin Gang told a news conference on the sidelines of an annual parliamentary session in Beijing on Tuesday that China had to advance its relations with Russia as the world becomes more turbulent.
• China's trade with Russia hit a record high in 2022 as Western countries imposed sanctions on Russia over its invasion of Ukraine.

(Source: Reuters)

• Jamaica’s debt stock decreased over the 12 months between March 2022 and February 2023.
• Minister of Finance and the Public Service, Dr. the Hon. Nigel Clarke, advised that total public debt fell from $2.18 trillion in March 2022, to $2.16 trillion last month.
• He provided the update during Wednesday’s (March 1) meeting of the Standing Finance Committee of the House of Representatives, whose members were reviewing the 2023/24 Estimates of Expenditure.
• Clarke further indicated that Jamaica’s debt service obligations for 2023/24 will be lower than those for the current fiscal year. He noted that last year, the principal repayment on our debt was $162 billion and forecasts $125 billion in 2023/24,
• The debt-to-GDP ratio is projected to be down to about 74.2% at the end of the 2023/2024 fiscal year. As the government continues to lower its debt-to-GDP ratio, it expands its fiscal capacity to spend more on productive activities to bolster economic growth.

(Source: JIS News)