• On January 19, 2024, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with The Bahamas and endorsed the staff appraisal without a meeting on a lapse-of-time basis.
• The Bahamas’ economy continues to rebound vigorously, driven by large tourism inflows. Real GDP growth is estimated to have reached 4.3% in 2023 (from 14.4% in 2022), while the unemployment rate fell below 9%.
• Inflation has been on a downward path since mid-2022. Backed by a strong recovery of tourism, the current account deficit is projected to have narrowed to 6.2% of GDP in 2023 (from 8.2% in 2022).
• Furthermore, the report noted that a strong cyclical recovery in revenues and a wind-down of pandemic-related spending improved the fiscal balance of the Bahamas. The fiscal deficit narrowed to 3.9% of GDP in 2022/23, while central government debt fell to 84% of GDP. Under current policies, the IMF staff projects a deficit of 2.6% of GDP in 2023/24 with debt falling to 78% of GDP by 2027/28.
• The economic outlook is favourable, albeit with downside risks. Tourist arrivals and real average spending, which surpassed pre-pandemic levels in 2023, should continue to rise in the near term, boosting real GDP and helping to narrow external and fiscal imbalances. Risks to the outlook include an economic slowdown in tourism source markets and the potential for costly natural disasters. Furthermore, raising potential growth beyond 1.5% is conditional on addressing bottlenecks in the energy sector and labour markets.
• That said, building fiscal buffers and investing in renewable energy infrastructure will help address downside risks stemming from natural disasters, global economic uncertainty, and climate change.

(Source: International Monetary Fund)

• Barbados says it expects its tourism sector to receive a boost of 25,000 seats for the 2024/2025 winter season after Delta Air Lines announced it was returning to the island with scheduled flights out of Hartsfield-Jackson Atlanta International and John F Kennedy (JFK) International Airports.
• Barbados' Tourism and International Transport Minister Ian Gooding- Edghill told a news conference that over the past few months, the Barbados Tourism Marketing Inc. (BTMI) had been engaged in a consistent and aggressive strategy of increasing and improving airline connections with the rest of the world.
• He said as a result, the government has finalised an agreement resulting in the return of Delta Air Lines from November this year.
• Effective November 23, 2024, Delta will provide a seven-day-a-week service from Atlanta, Georgia, and provide once-weekly services on Saturdays from New York, commencing December 21 of this year.
• Overall real GDP is largely being driven by the revival of the international tourism sector amidst the lingering effects of domestic inflation. Continued demand for Barbados’ tourism products, supported by intensified marketing campaigns in key source markets, increased airlift, sporting events, and a full return to Crop-Over Festivities; are expected to continue to provide tailwinds to Barbadian economic growth in 2024 (forecast: 3.4%).

(Source: CariCris)

• Elevated shipping costs as a result of ongoing tensions in the Red Sea could impede the global fight against inflation, the Organization for Economic Co-operation and Development (OECD) said Monday.
• The Paris-based group estimates that the recent 100% rise in seaborne freight rates could increase import price inflation across its 38 member countries by nearly 5 percentage points if they persist. This could add 0.4% to overall price rises after a year, they added.
• In late 2023, major shipping firms began diverting their vessels away from Egypt’s Suez Canal, the quickest trade route between Europe and Asia, due to a spate of attacks by Iran-backed Houthi militants based in Yemen. Tensions remain high, with the navies of countries, including the United States, involved in the conflict.
• Ships are taking the longer Cape of Good Hope route around the southern coast of Africa, which increases journey times by between 30% and 50%, taking capacity out of the global market.
• However, the OECD also notes that the shipping industry had excess capacity last year, a result of new container ships being ordered, which should moderate cost pressures.
• Clare Lombardelli, chief economist at the OECD, told CNBC on Monday that a sustained increase in inflation as a result of the latest crisis is a risk, but not the group’s base case.

(Source: CNBC)

• Australia's central bank held interest rates steady on Tuesday but cautioned that a further increase could not be ruled out given inflation was still too high, a strong signal that it isn't in a hurry to start easing policy anytime soon.
• The relatively hawkish tone of the central bank's statement boosted the Australian dollar and saw futures push out the likely timing of a first easing to September from August. Wrapping up its first policy meeting of the year, the Reserve Bank of Australia (RBA) kept rates at a 12-year high of 4.35% but left the door open to another rise if needed.
• Markets had wagered heavily on a steady outcome given inflation had eased by more than expected in the fourth quarter, but the RBA statement indicated it was still not confident that inflation was on a sustainable path towards its 2%-3% target.
• "While recent data indicate that inflation is easing, it remains high... The Board needs to be confident that inflation is moving sustainably towards the target range," said the RBA Board in a statement.
• The central bank did trim its forecasts for inflation and economic growth but emphasised demand was still running ahead of supply, suggesting it would be in no rush to cut rates.

(Source: Reuters)

• Listed Junior Market company iCreate Limited says it will be taking legal action against Sagicor Investments. The company says it is challenging the decision made by Sagicor Investments to place the digital and creative firm into receivership.
• CEO and founder of iCreate Tyrone Wilson said the decision was made after careful discussion with his legal team. The news comes less than 48 hours after it was made public that iCreate paid off the outstanding funds on the $24Mn bond from Sagicor Investments.
• "Once we got notice of the purported receivership, we immediately sought legal representation and engaged the services of Henlin Gibson Henlin led by King's Counsel Georgia Gibson Henlin. iCreate contends that Sagicor Investments Jamaica Limited Appointment of Receivership is invalid - a stance clearly communicated to Sagicor by our legal team throughout the last six weeks."
• He further stated that contrary to public perception, iCreate has continued to manage its operations independently since the notice of appointment of receivership.
• In response to iCreate's decision, Sagicor Investments said it wishes to reassure its stakeholders that it is confident in the propriety and legality of its actions relating to the receivership. Sagicor Investments said it is prepared to vigorously defend any litigation that may be filed against it in this matter.

(Source: RJR)

• In its latest meeting on January 31, the Banco Central do Brasil (BCB) cut the benchmark rate by 50 basis points to 11.25%; as inflation continues towards the target range (3%), and signalled further rate cuts to come.
• The decision made unanimously, marked a cumulative reduction of 250bps since the beginning of the easing cycle in August 2023. The central bank took this step as inflation continued easing, with the latest headline inflation reading coming in at 4.6% y-o-y for December.
• While this is above the BCB’s inflation target of 3.0%, it is on track to fall into the target band (1.5-4.5%) in the months ahead.
• For the upcoming March 31 meeting, Fitch expects a further 50bps reduction to 10.75%, driven by moderate inflation and slowing growth, though stable US rates will preclude a larger cut.
• Fitch sees a further 200bps reduction to a 9.25% benchmark rate by end-2024. Though this is slightly above consensus, Fitch does expect the bank will keep easing amid a further slowdown in inflation and growth.
• Risks to the outlook are balanced. The primary upside risk involves inflation potentially remaining high due to Brazil’s robust labour market, external pressures from Middle East tensions and fiscal policies. On the downside, a more aggressive Federal Reserve policy shift, with cuts being either deeper or sooner than anticipated, could potentially allow the BCB to reduce rates more rapidly.
• Unlike their US and European counterparts, Latin America’s central banks led the monetary policy tightening wave, as inflation spiked in the post-pandemic recovery. They are now leading the reversal of the interest rate cycle, with central banks in Brazil, Peru, Mexico, Colombia, and Chile already cutting their benchmark rates.
• These sovereigns have noted declining inflation levels, all of which have been tending to their respective targets and have begun cutting rates to shore up their economies as growth has slowed or turned negative. Consequently, for Latin American central banks, the question over the next few months will be how fast and by how much they will cut interest rates as they balance the risks to inflation and navigating a soft landing. 

 (Source: Fitch Solutions and NCBCM Research)

• After a thorough five-hour budget presentation, two weeks of policy debates and scrutiny from the political opposition, the National Assembly, on February 2, 2024, approved the historic $1.146Tn budget to deliver accelerated improvement to the lives of Guyanese and development.
• Following the wrap-up of the consideration of the budget estimates, the Senior Minister in the Office of the President with Responsibility for Finance, Dr Ashni Singh, reported to the National Assembly that the estimates were thoroughly considered in the Committee of Supply.
• Budget 2024, the country’s largest to date, is the fifth budget to have been presented by the People’s Progressive Party/Civic (PPP/C) administration, since being elected to office in August 2020.
• This year’s budget is the largest ever, and despite being 46.0% bigger than Budget 2023, and is entirely financed by no new taxes.

(Source: CariCris)

• Minneapolis Federal Reserve President Neel Kashkari suggests that despite interest rates being at their highest in about 23 years, they are not harming the economy. This situation could provide policymakers with more time before deciding on potential rate cuts.
• He further argues that recent economic developments indicate that the Federal Reserve's policy is not as restrictive on growth as it may seem. The longer-run "neutral" rate, which is neither restrictive nor stimulative, is likely higher than before the Covid-19 pandemic.
• Kashkari notes that what might appear to be a tight monetary policy based on historical trends may not be the case currently. Nominal rates could stay higher for a longer period without adversely affecting the economy.
• The assessment suggests that the current monetary policy stance may not be as tight as previously assumed, giving the Federal Open Market Committee (FOMC) time to assess economic data before considering rate cuts. This has implications for when, how much, and how quickly the Fed should adjust rates.
• Kashkari's comments align with recent statements from Federal Reserve Chair Jerome Powell, who indicated a reluctance to cut rates in the near term. Powell emphasized the positive economic outcomes despite past rate hikes, supporting the idea that the current policy stance may not be overly restrictive.

(Source: CNBC)

• Occidental CEO Vicki Hollub warns that the oil market is heading towards a supply shortage by the end of 2025 due to the world's failure to replace current crude reserves rapidly enough.
• Hollub notes that about 97% of today's oil was discovered in the 20th century, and the world has replaced less than 50% of the crude produced over the last decade, indicating a significant gap in replacing depleted reserves.
• Despite the ongoing conflicts in the Middle East, Hollub points out that the oil market is presently oversupplied, keeping prices down. Countries like the U.S., Brazil, Canada, and Guyana have been pumping record amounts of oil amid a slowing demand in China.
• Hollub acknowledges the current market imbalance as a short-term demand issue, she emphasizes that it will transform into a long-term supply problem in the coming years, with the supply and demand outlook flipping by the end of 2025.
• OPEC predicts global oil demand to grow by 1.8 million barrels per day in 2025, outpacing production growth outside the cartel. This forecast suggests a potential supply deficit unless OPEC adjusts its production cuts. Despite lower prices in 2023, Hollub expects a rebound, with Occidental projecting WTI to average around $80 in 2024.

(Source: CNBC)

• Jamaica is currently experiencing unprecedented levels of investor interest, thanks to a positive economic environment, says Prime Minister, the Most Hon. Andrew Holness.
• During the 19th Jamaica Stock Exchange (JSE) Regional Investment and Capital Markets Conference at The Jamaica Pegasus Hotel in New Kingston, Mr. Holness stated that “global investors, who in the past would have seen Jamaica as too risky, are now taking a serious interest”.
• Contributing factors include ten consecutive quarters of economic growth since the COVID-19 epidemic, a record-low 4.5% unemployment rate, and lower inflation. Notably, unemployment data released after Mr Holness’ speech for October 2023 set a new record low for Jamaica at 4.2%.
• “We are on target to now reduce our debt-to-GDP ratio to 74.0% by the end of March 2024. This is well below pre-pandemic levels and the lowest in 25 years,” Mr. Holness further stated while also citing Jamaica’s credit ratings, which are now at the highest levels they have ever been.
• In September 2023, Standard and Poor’s (S&P) upgraded Jamaica’s rating to BB-. Meanwhile, in November 2023, the Government issued a Jamaican dollar-linked international bond for J$46.6Bn, which is equivalent to US$300Mn, which represents the first time in our history that Jamaica has been able to issue a Jamaican dollar-linked bond in the international capital markets.
• The current economic environment, coupled with the government’s fiscal prudence, has given investors the confidence to invest in Jamaica, which is necessary to boost economic growth.

(Source: JIS)