• Minister of Finance and the Public Service, Dr. the Hon. Nigel Clarke, says that upgrading Jamaica’s credit rating by Standard and Poor’s will facilitate access to financing on better terms.
• Standard and Poor’s (S&P) Global Ratings, on September 13, upgraded the Government of Jamaica’s Long-Term Foreign and Local Currency Issuer Default Rating (IDR) from B+ to BB-, with a ‘Stable’ outlook. It is the best global grading Jamaica has received from S&P since the entity started rating the country’s sovereign debt in 1999.
• The Minister was speaking during the opening ceremony for the Jamaica Institution of Engineers’ observance of Engineers’ Week, at The Summit in New Kingston on Monday (September 18).
• Minister Clarke highlighted the country has the opportunity to access financing at costs lower than before. This is because a higher credit rating means that a country is more creditworthy, which ultimately means that an investor will require lower interest terms to lend.
• Additionally, if less is paid for the money you need for financing, it expands fiscal capacity, so more can be spent on health, infrastructure and security.
• The Finance Minister also noted that the higher the credit rating, the more favourable the investment climate is deemed to be. This is because investments are less risky. The rating is linked to the riskiness or the perceived riskiness of an economy. The higher the credit rating is the more open the economy will be to foreign investment. More foreign investment means more economic activity and more economic activity means more jobs for Jamaicans. As a result, the higher credit rating provides an environment that supports the creation of more jobs for the Jamaican people and an accompanying better investment climate.

(Source: JIS News)

• Jamaican Teas Group of Companies announced that effective September 25, 2023, Alston Marketing Company Limited (AMCO) will be the exclusive distributor for the Jamaican Teas Limited-owned brand- Caribbean Dream and Tetley which is manufactured under license.
• AMCO is a wholly owned subsidiary of the Ansa McAL Group of Companies, one of the largest conglomerates in the region with more than US$1Bn in revenues.
• Ansa McAL comprises over 27 subsidiary companies, operating in multiple territories including Jamaica and is a listed company on the Trinidad and Tobago Stock Exchange.
• This new distribution deal is expected to expand its product reach and bolster the company’s revenues, when combined with the cost savings from the consolidation of its two plants announced earlier, will ultimately increase the bottom line and shareholders’ value.

(Source: JSE)

• Guyana’s offshore blocks have attracted interest from six bidders, and while the government is content with the offers for eight of its 14 oil discoveries, the State is open to partnering with other bilateral allies.
• This was revealed by President, Dr. Irfaan Ali, who, during a discussion at the Inter-American Dialogue in Washington DC, said India, Qatar and the Dominican Republic have signalled their interest in exploring and developing offshore oil blocks.
• “India would have expressed a willingness to work from government to government, Qatar had expressed a willingness to work government to government. The Dominican Republic and several other countries expressed that interest too,” the Guyanese Head of State said while responding to questions at the event.
• On Tuesday, September 12, the country closed its first oil block auction. Six companies including ExxonMobil, which already has the giant Stabroek Block and other companies like SISPRO INC (Guyana), headed by Guyanese businesswomen; Total Energies EP Guyana BV; Liberty Petroleum Corporation of the US and Ghana-based Cybele Energy Limited submitted bids.
• Given the current climate of the market, Mr Ali stated that he is pleased with the number of bids the country has received. He noted that while the country is open to government-to-government partnerships in the sector, the process needed to be done openly and transparently first.
• Guyana’s economy has undergone a radical transformation, from producing no crude at all to now producing an average of some 400,000 barrels of oil per day. The economy continues to grow very rapidly, supported by the government's modernization plans, including the unparalleled oil sector expansion. After growing by 62.3% in 2022, it is anticipated to grow by 38% in 2023 and oil production is expected to increase to 600,000 barrels per day by 2024.

(Sources: CariCris & International Monetary Fund)

• The Brazilian economy kicked off the third quarter with a stronger-than-expected pace, bolstering recent upward revisions in the country's GDP growth forecast for 2023.
• The Economic Activity Index (IBC-Br), a key predictor of gross domestic product, registered seasonally adjusted growth of 0.44% in July from June, surpassing the median forecast of a 0.3% expansion in a Reuters poll of economists.
• According to the central bank, the IBC-Br was up 0.66% on a non-seasonally adjusted basis from July 2022 and marked a rise of 3.12% in the 12 months.
• The data has revealed a significantly more resilient economy since the beginning of the year, and this trend has been sustained in recent months, said Rafael Perez, an economist at Suno Research. However, Perez said he expected greater stability in economic activity by the end of this year, citing the cumulative effects of the central bank's restrictive monetary policy.
• The solid expansion in monthly terms reinforces the view that the BCB (Banco Central do Brasil) will cut the benchmark Selic rate by 50 basis points (bps) at its meeting on September 20. The central bank initiated an easing cycle last month, lowering its key interest rate to 13.25% after keeping it unchanged for nearly a year to combat high inflation in South America's largest economy.
• Given these factors, Fitch has raised its forecast for growth this year from around 1.0% at the beginning of the year to 3.0% currently, putting it above Bloomberg consensus of 2.5%

(Sources: Fitch Solutions & Reuters)

• The Bank of Canada on Tuesday said recent volatility in headline inflation is not unusual but the underlying trend shown by core measures was inconsistent with bringing inflation down to the 2% target. Earlier on Tuesday, August inflation figures showed a jump in the headline number to 4.0% from 3.3% in July, higher than most analysts had anticipated.
• One of the core inflation measures, CPI-trim - which leaves out spiking mortgage interest costs - has been between 3.5%-4% in recent months. "Underlying inflation is still well above the level that would be consistent with achieving our target of 2% CPI inflation," Deputy Governor Sharon Kozicki said in a speech at the University of Regina in Saskatchewan.
• The Bank of Canada kept its key rate at 5% on Sept 6, noting the economy had entered a period of weaker growth, but said it could hike again should price pressures persist. In her speech, Kozicki also said that while there is evidence that previous rate hikes are slowing demand, inflation remains too high, "and that tends to mean that real interest rates need to remain high".
• After the August inflation data was released, money markets raised bets for a rate hike after the next policy meeting on Oct. 25, seeing a 42% chance of an increase compared with 23% before.

(Source: Reuters)

• Global debt hit a record $307 trillion in the second quarter of the year despite rising interest rates curbing bank credit, with markets such as the United States and Japan driving the rise, the Institute of International Finance (IIF) said on Tuesday.
• The financial services trade group said in a report that global debt in dollar terms had risen by $10 trillion in the first half of 2023 and by $100 trillion over the past decade. It said the latest increase has lifted the global debt-to-GDP ratio for a second straight quarter to 336%.
• Prior to 2023, the debt ratio had been declining for seven quarters. Slower growth, alongside a deceleration in price increases, was behind the debt ratio rise, the report said. "The sudden rise in inflation was the main factor behind the sharp decline in debt ratio over the past two years," the IIF said, adding that with wage and price pressures moderating, even if not to their targets, they expect the debt to output ratio to surpass 337% by year-end.
• More than 80% of the latest debt build-up had come from the developed world with the U.S., Japan, Britain and France registering the largest increases. Among emerging markets, the biggest rises came from the largest economies, namely China, India, and Brazil. "As higher rates and higher debt levels push government interest expenses higher, domestic debt strains are set to increase," the IIF said.

(Source: Reuters)

• For August 2023, The All-Jamaica Consumer Price Index (CPI) increased by 1.0% for August 2023 influenced mainly by a 1.4% rise in the index for the division ‘Food and Non-alcoholic Beverages’
• The increase in food prices was due largely to a 4.0% increase in the index for the class ‘Vegetables, tubers, plantains, cooking bananas and pulses’. Drought conditions continued to adversely affect the supply of agricultural produce resulting in higher prices for some items.
• The inflation rate for the month was also influenced by a 5.2% increase in the index for the division ‘Information and Communication’, due to higher rates for mobile communication services.
• Additionally, there was a 0.8% rise in the index for the division ‘Housing, Water, Electricity, Gas and Other Fuels’, resulting from increased rates for electricity, water and sewage and a 1.0% rise in the index for the ‘Transport’ division due to higher petrol prices.
• The point-to-point inflation rate (August 2022 – August 2023) was 6.8%. The divisions ‘Food and Non-Alcoholic Beverages' (10.9%), ‘Restaurants and Accommodation Services’ (12.0%) and ‘Furnishings, Household Equipment and Routine Household Maintenance’ (11.1%), were the largest contributors to this increase. Tempering these increases, however, was a fall of 1.2% in the index for the 'Transport' division.
• All classes within the ‘Food and Non-Alcoholic Beverages' division increased for the August 2022 - 2023 period. The key contributor was the class ‘Vegetables, tubers, plantains, cooking bananas and pulses’, which rose by 30.2% as a result of continued drought conditions. The index for the class, ‘Cereals and cereal products’ increased by 5.1%, due to higher prices for bread, flour and rice. Increased prices for other meat products such as chicken, turkey neck, corned beef and other meat products, contributed to the 4.1% rise in the index for ‘Meat and other parts of slaughtered land animals’.
• The increase in the index of the ‘Restaurants and Accommodation Services’ division was attributable to higher prices for food. The index for the division ‘Furnishings, Household Equipment and Routine Household Maintenance’ was largely impacted by the upward movement in the increase in the National Minimum Wage for Jamaica on June 1, 2023.
• Moderating these increases was a fall in the index for the ‘Transport’ division due to lower prices for petrol products over the 1 year. The class 'Fuel & lubricants for personal transport equipment' declined by 10.2% for this review period.
• On August 29, 2023, the BOJ held its monetary policy meeting, where it was deemed appropriate to maintain the policy rate at 7.00% and watch the pass-through effects on deposit and loan rates. Despite inflation inching up over the past few months, point-to-point inflation is anticipated to continue to fall and subsequently enter the BOJ’s target range of 4.0% to 6.0% by the December quarter. The next policy decision will be on the 29^th of September, where it is expected that BOJ will continue holding the policy rate at 7.00%.

(Source: STATIN)

• Brazil will end a tax exemption for importing electric vehicles, gradually raising the duty to 35% over three years, Industry Ministry official Uallace Moreira told Reuters last Friday.
• Brazil-based carmakers lobbied for the measure, overcoming pushback from Chinese manufacturers who sell electric vehicles in the country. However, the final details are still being debated, and its timing will be decided by Industry Minister and Vice-President Geraldo Alckmin, Moreira said.
• "What can we do to stimulate local production? Make imports a little more difficult or more expensive," Moreira said, arguing that several countries have adopted protectionist policies in this sector.
• Moreira said the tariff will be implemented gradually, so as not to create a shock in the market, and will be in line with the government's plan to increase private investment in green technology.
• He also said the government will issue a temporary measure within 15 days to launch the second phase of its "Rota 2030" programme, aimed at increasing efficiency in the automotive sector, which will be renamed the "Green Mobility Programme".
• The new programme will stimulate energy efficiency projects using tax credits, as well as create a mechanism that Moreira called "green taxation." The plan would stagger the collection of a tax on industrialized products, depending on the energy efficiency of the vehicle models, the recyclability of the products and local production density.

(Source: Reuters)

• After restarting its rate-cutting cycle in August with a 25 basis point reduction to 7.50%, Fitch Solutions expect that the Banco Central de la República Dominicana (BCRD) will proceed cautiously, cutting to 6.75% by end-2023 and 5.00% by end-2024.
• According to the post-meeting minutes, the previous month’s pause was due to improving economic outlooks for the US and Latin America and the US Federal Reserve’s 25 basis point hike earlier that month. For the August meeting, the central bank’s monetary board cited the broad decline in international prices for commodities like oil and food, as well as materials for manufacturing. 
• Additionally, both headline and core inflation have shown a sustained decline since Q322 towards the central bank’s inflation target range of 4.0% (+/- 1.0%), although headline inflation ticked up slightly from 3.9% in July to 4.3% in August.
• Given this, Fitch expects to see a bit of reflation later in the year and 2024 due to currency depreciation and rising commodity prices, which underpins its forecast of 4.5% y-o-y inflation by end-2023 and 4.4% average in 2024.
• Risks to Fitch’s interest rate forecast are balanced as stronger US and DR economies could prompt the BCRD to temper policy loosening, while a deeper US recession in 2024 could pose headwinds for the DR economy, pressuring the bank to cut rates to stimulate growth.

(Source: Fitch Solutions)

• U.S. Federal Reserve officials, who have tentatively embraced the possibility they can squelch inflation without a recession, meet this week with an autoworkers strike, a possible federal government shutdown, and a student loan squeeze on consumers posing new risks to that best-case outcome.
• The United Auto Workers launched a strike against all three major automakers on Friday with an initial walkout of around 13,000 employees at three plants, but those numbers could grow. Federal elected officials have only until Sept. 30, when current spending authorizations expire, to come up with a deal or federal agencies will have to shutter, and congressional Republicans have stymied negotiations.
• With the economy already expected to slow over the final months of the year, prolonged disruptions in the auto industry and at federal agencies could have unpredictable results: Sapping consumer spending, possibly pushing up car prices in a blow to the Fed's inflation fight, and producing the sort of knock to business and consumer confidence that could spell the difference between a "soft landing" and a downturn.
• With millions of consumers also facing the renewal of student loan payments in October that will divert from other spending, Goldman Sachs economists have tempered their generally bullish outlook with warnings of a fourth-quarter "pothole" that could knock more than a percentage point from gross domestic product growth.
• Over recent months’ economic data has generally worked in the Fed's favour, with inflation ebbing even as the economy continues to grow above trend and add a healthy number of jobs each month. However, shutdowns of two major sectors - with potentially as many as 146,000 auto workers striking and perhaps 800,000 federal employees without paychecks - will chip away at growth and confidence every week they continue.

(Source: Reuters)