• Fitch Solutions revised its forecast for Panamanian real GDP growth in 2023 from 6.0% to 5.5% while maintaining its below-consensus projection for a 3.0% expansion in 2024. The downward revision comes largely in response to the significant social unrest that has broken out across Panama over the past five weeks, with impromptu roadblocks severely impeding the flow of goods and disrupting activity in the service sector.
• These protests have been focused on the Cobre Panamá copper mine, with some locals concerned about the environmental impact and others taking issue with the contract that was agreed with the mine’s operator, First Quantum.
• Production at the mine – which directly accounts for around 5.0% of GDP and 1.0% of global copper output - is temporarily suspended owing to difficulties obtaining supplies amid an ongoing blockade. 
• The Supreme Court ruled on November 28, 2023, that First Quantum’s contract with the Panamanian government was unconstitutional (The court found that it violated Panamanians’ rights to life, health, and a contamination-free environment), but it is not yet clear whether production will be halted on a more permanent basis or if activity will continue as arbitration talks continue. 
• However, Fitch’s core view for now is that operations will eventually restart in 2024, given how important the mine is for both the Panamanian economy and the public finances. The government has already temporarily suspended plans to boost pensions for lower-income households due to the loss of revenues generated from the mine.
• Risks to the outlook are considerable and include the lack of clarity surrounding the future of the Cobre Panamá following the Supreme Court's ruling that the agreement between its operator First Quantum and the Panamanian government was unconstitutional, and the lack of reliable and timely economic data in Panama.

(Source: Fitch Solutions)

• The U.S. economy experienced a faster-than-expected growth rate of 5.2% annualised in the third quarter, marking the fastest expansion since 2021. This growth was driven by increased business investments in warehouses and equipment.
• Despite the robust growth, there are signs of a slowdown. Higher borrowing costs have dampened hiring and spending, leading to a cooling of economic momentum in the final quarter of the year. Consumer spending growth was revised down to 3.6%, and there are concerns about the impact of shortages caused by the United Auto Workers strike.
• After-tax profits, as measured by S&P 500 profits, increased significantly, and personal income, driven by higher wages, contributed to the economy's growth. However, Gross Domestic Income (GDI) contracted on a year-on-year basis, raising some concerns, though it's noted that the economy has historically avoided recession with similar GDI declines.
• The report indicates that the Federal Reserve may be in a position to halt its rate-hiking campaign, as slowing demand and lower inflation create a favourable environment. Financial markets are even anticipating a potential rate cut in mid-2024, following a series of interest rate increases by the Fed since March 2022.

(Source: Reuters)

• A poll indicates that a majority of Britons, 57%, favour re-joining the European Union's single market, even if it means reinstating the free movement of workers from the EU.
• Recent polls highlight a growing sentiment that Brexit was a mistake, contrasting with the key factor of curbing immigration that drove the 2016 vote to leave the EU.
• The survey follows data revealing a record-high annual net migration to the UK, more than double the pre-Brexit figure, emphasising the relevance of immigration concerns in the public discourse. Support for single-market membership is politically divided. Among those who would vote for the opposition Labour Party, 53% support it, while only 29% of those backing the governing Conservatives favouring a return to the single market.
• Regardless of Brexit views, 72% of Britons express a desire for closer ties with the European Union, showcasing a shared sentiment for enhanced relations with the EU.

(Source: Reuters)

• Tyrone Wilson, former CEO of education and multi-media firm iCreate, says he's set to return as the company's CEO. He was re-elected to the company's board last week after resigning in August.
• Wilson added that there are several unclear and un-clarified issues surrounding his resignation to which updates will be provided.
• This comes after iCreate was suspended by the Jamaica Stock Exchange due to a lack of submission of its Audited Financials and the non-appointment of a Mentor, as required by the Junior Market Rules.

(Source: RJR News)

• A strong public service is critical in enabling Jamaica to achieve the level of development for which it strives.
• Cabinet Secretary Audrey Sewell, in making the declaration at the recent awards ceremony for the top civil servants of the year held at the Terra Nova All-Suite Hotel in Kingston, said that a key characteristic of a developed country is the strength of its public sector.
• She highlighted that employees within the public sector are the architects of government policies that catalyse sustainable economic development.
• Sewell said that the Government remains committed to the transformation of the public sector and the vision articulated in the ‘Government at Your Service: Public Sector Modernisation Vision and Strategy: 2002-2012.
• This speaks to creating a public sector with a culture of performance that is client-focused and results-oriented and is constantly seeking ways to improve the delivery of public services.
• While there are still some ways to go, she noted that the public sector continues to demonstrate resilience and adaptability in navigating the challenges of modernisation, technological innovation, and public health crises.

(Source: JIS)

• The International Monetary Fund (IMF) is recommending that The Bahamas consider implementing a corporate income tax coupled with a personal income tax targeting high earners. In its Staff Concluding Statement of the 2023 Article IV Mission, the IMF also noted that there is an opportunity to meaningfully streamline current preferences, loopholes, and exemptions within the tax system.
• “Beyond reducing the fiscal deficit, a set of comprehensive tax reforms would be valuable in both raising revenues and improving progressivity. In particular, the implementation of the OECD global minimum corporate tax by trading partners provides an opportunity for The Bahamas to introduce a well-designed corporate income tax accompanied by a personal income tax on the highest earners. There is also scope to significantly rationalize existing preferences, loopholes, and exemptions in the tax system,” the IMF stated.
• The IMF noted that after peaking at 7.1% in July 2022, inflation has fallen steadily to 2.3% in July 2023, largely driven by the fall in global energy prices.
• Nonetheless, the Fund noted that a fall in tourism demand due to an economic slowdown in source markets could weigh negatively on the growth outlook. Furthermore, renewed pressures on global food and oil prices could burden lower-income households pressure on the balance of payments. Any associated fiscal measures to dampen the pass-through of global prices to the domestic economy would have to be well-targeted to mitigate further strain on the fiscal position. Finally, The Bahamas is highly exposed to risks emanating from climate change and natural disasters. In the event that risks are realised, domestic financing challenges could increase.
• According to the Fund, efficiency gains in spending programs and improvements in the financial management of state-owned enterprises will be needed to offset some of the budgetary pressures arising from an ageing population. To improve longer-run growth and strengthen social inclusion, there will be a need to reorient spending priorities toward education, healthcare-targeted social transfers, and infrastructure (particularly those that will increase resilience to the effects of climate change).
• The IMF also pointed out that enhancing debt management practices is crucial for mitigating the vulnerabilities stemming from The Bahamas’ high debt rollover requirements. It said that recent reforms aimed at fortifying both primary and secondary debt markets are expected to enhance the liquidity of government bonds, encouraging increased domestic holdings of longer-term securities.

 (Sources: IMF & Eyewitness News)

• The Panama Canal Authority (ACP), one of the world's main maritime trade routes, announced on Friday it is launching a special auction slot on Saturday at a base price was $55,000, as it battles a severe drought that has forced it to reduce daily ship crossings.
• "The purpose of this measure is to provide a greater opportunity of obtaining a slot for vessels in the Panamax Locks that have been waiting in the transit queue for an extended period," the canal's authority said in a statement.
• The Authority said it will add extra slots, allowing ships to pay big premiums to transit the waterway, which has become congested due to an ongoing drought.
• The special auctions allow vessels that have been waiting for a long time to pay a one-off fee — at times recently reaching several million dollars — in order to transit the canal. Only vessels that have been waiting for 10 days or more will be eligible to participate, according to an advisory.
• In a communiqué to the shipping lines, the ACP informed that the auction would be announced three days before the transit date and would be held two days before, as was the case last Saturday.
• Following the first bid, a chemical tanker was awarded the special slot last Monday for $1,100,100.
• The Canal Authority added that spaces (slots) that become available during the reserve period may be offered through extraordinary auctions, depending on several factors, including the water level of Gatun Lake. Full container vessels that have already obtained a reservation space before the auctions are called will also be considered. The charges derived from these auctions will be additional to the usual tolls paid for crossing.

 (Sources: Reuters & Port News)

• Federal Reserve officials express comfort with maintaining current interest rates for the rest of the year, aiming for a "soft landing" for the U.S. economy.
• Fed Governor Christopher Waller is confident in the current policy's ability to slow the economy and bring inflation back to 2%, considering potential rate cuts if inflation continues to decline over the next few months.
• Waller's remarks led to a market reaction, with bond yields falling and investors adjusting expectations, indicating a higher probability of rate cuts starting in May and potentially decreasing by more than a full percentage point in 2024.
• Differing views within the Fed are evident, with Fed Governor Michelle Bowman expressing doubts about the durability of progress on inflation and Chicago Fed President Austan Goolsbee suggesting a sharp decline in inflation. The final pre-meeting communication is expected from Fed Chair Jerome Powell.

 (Source: Reuters)

• U.S. consumer confidence rebounded in November, breaking a three-month decline, driven by plans for significant purchases like vehicles and houses despite concerns about higher prices and interest rates.
• While the improvement in confidence was notable, around two-thirds of surveyed consumers still perceive a recession as likely within the next year, contrasting with economists' predictions of slow growth instead.
• The Conference Board's consumer confidence index rose to 102.0 in November, surpassing expectations. Optimism was more pronounced among households aged 55 and older, with the present situation index slightly decreasing and the expectations index rising.
• Consumers express worries about rising prices, but their 12-month inflation expectations fell to 5.7%. The share of consumers anticipating higher interest rates was the smallest since April 2021, aligning with market expectations of a potential Fed rate cut in mid-2024.
• Financial markets responded positively, with stocks rising, the dollar falling, and U.S. Treasury prices increasing. Consumers showed increased intentions to make significant purchases, and online spending during Cyber Week exceeded expectations.
• The labour market remains resilient, supporting consumer spending, but concerns about job availability are emerging. Additionally, the survey indicates more consumers plan to buy a house, though affordability challenges may arise due to high mortgage rates and a shortage of available properties.

(Source: Reuters)

• Around 1,000 ships pass through the Panama Canal each month carrying a total of over 40Mn tons of goods—about 5% of global maritime trade volumes. However, water levels in this vital link between the Atlantic and Pacific oceans have fallen to critical lows because of the worst drought in the canal’s 143-year history.
• As a result, the Bank of Jamaica’s Monetary Policy Committee has expressed concern that worsening shipping delays in the Panama Canal may begin to affect the bank’s efforts to tame inflation.
• The issue was discussed during the September meeting of the central bank's monetary policy committee (MPC) and was itemised in the minutes as one of the developing "risks" that must be monitored as a drought, exacerbated by a severe El Nino weather system in Panama, continues to plague water levels at the Gatún Lake, which feeds the locks of the key global trade conduit.
• According to Panama Canal authorities, the drought requires them to reduce the number of daily transits from 29 to 25 ships per day starting this month, and in the proceeding weeks, they will reduce vessel transits even more until it declines to 18 ships a day in February. That represents between 40% to 50% of full capacity. Before the restrictions, up to 38 vessels traversed the canal daily.
• Therefore, economies like the Jamaica, which relies on the canal for trade, should prepare for more disruption and delay.
• Though the inflation outturn has fallen within the BOJ’s target range for the past two months, 5.9% and 5.1% for September and October, respectively, the delays could spark another round of inflationary shocks as the costs of moving goods increase.

(Source: IMF)