• Fitch Solutions has revised its Short-Term Political Risk Index (STPRI) score for Guyana from 57.4 to 59.9 out of 100.
• The revision is based on both softening price growth and the successful completion of the local government elections (held on June 12, 2023), which bode well for the ‘policy continuity’ and ‘social stability’ components of the index.
• The successful completion of the local government elections and falling inflation suggest a broadly improving political environment in Guyana.
• Granted, the local government elections are far less consequential compared to the presidential elections. Nevertheless, the elections took place in an orderly fashion and, unlike the March 2020 snap general elections, the results were not disputed and protests did not emerge, boosting confidence in the market’s democratic processes.
• Additionally, the latest monthly data shows inflation decelerating to 3.3% y-o-y in April and 3.0% in May, down from 6.4% in January due to falling food prices. This, coupled with the government’s expansionary 2023 budget will improve household purchasing power, which in turn will bode well for social stability.
• Despite the upward revision to the STPRI score, Guyana’s score is still somewhat low in part due to a poor security environment and persistent ethnic tensions.

(Source: Fitch Solutions)

• The U.K. is the only country among the Group of Seven wealthy nations where inflation is still rising, according to data from the Organization for Economic Cooperation and Development. The Paris-based organization said Tuesday that year-on-year inflation in the G7 fell to 4.6% in May, down from 5.4% in April, reaching its lowest level since Sept. 2021.
• The downward trend was observed across most advanced economies in May, with annualized inflation trending lower in the U.S. Canada, France, Germany, Italy and Japan. Britain, however, was found to be an outlier.
• U.K. consumer prices across all items rose to 7.9% in May when compared to the previous year, the OECD said, up slightly from 7.8% in April.
• Last month, the Bank of England hiked interest rates by 50 basis points to 5%, a larger increase than many expected. The BOE’s 13th consecutive rate rise takes the base rate to the highest level since 2008.
• The move, which exacerbated fears of a mortgage catastrophe, marked a divergence from other major central banks that have been able to either slow or pause interest rate hikes. The OECD in early June forecasted that the U.K. will post annual headline inflation of 6.9% this year, the highest level among all advanced economies.

(Source: CNBC)

• Major industry players at the Energy Asia conference held in Kuala Lumpur this week stated that oil and gas will continue to be leading sources of energy for decades to come on the back of a lagging energy transition.
• “Energy transition is going to take a lot longer, it’s going to cost a lot more money and need new technologies that don’t even exist today,” said John Hess, CEO of U.S. oil company Hess Corporation. “When it comes to clean energy, the world needs to invest $4 trillion a year — and it’s nowhere close,” Hess continued.
• “Liquids are projected to remain the world’s leading energy source in 2050, even as demand growth slows beyond 2025,” Erin McGrath, ExxonMobil’s public and government affairs senior advisor, told CNBC.
• “Overall, demand for liquids is expected to rise by about 15 million barrels per day by 2050. Almost all the growth will come from the emerging markets of Asia, Africa, the Middle East and Latin America.”          
• In an e-mail exchange Tuesday, the largest U.S. oil producer ExxonMobil reiterated the same sentiment on oil demand. The company expects oil to remain the largest primary source of energy for at least two more decades given its vital place in the commercial transportation and chemical industry.

(Source: CNBC)

• Total value added at constant prices for the Jamaican economy increased by 4.2 per cent in the first quarter of 2023 when compared to the first quarter of 2022. This was attributed to growth in the Services and Goods Producing Industries of 5.4 per cent and 1.0 per cent, respectively. The performance of the economy reflected the sustained recovery from the impact of the COVID-19 pandemic. This outturn was significantly higher than the 2.7% preliminary estimate put forward by the PIOJ.
• The increase in the Services Industries was due to improved performance in all industries, except for the Producers of Government Services which declined by 0.3 per cent. Growth was recorded for Hotels & Restaurants (29.7 per cent), Other Services (13.0 per cent), Transport, Storage & Communication (7.1 per cent), Wholesale & Retail Trade; Repairs; Installation of Machinery & Equipment (2.8 per cent), Real Estate, Renting & Business Activities (2.3 per cent), Finance & Insurance Services (1.9 per cent) and Electricity & Water Supply (0.7 per cent). The performance of the Hotels & Restaurants industry was positively impacted by a 45.5 per cent growth in foreign national arrivals to the island.
• Within the Goods Producing Industries, higher output levels were recorded for Mining & Quarrying (114.7 per cent) and Manufacturing (3.6 per cent). However, there were declines in Agriculture, Forestry & Fishing and Construction of 6.9 per cent and 4.2 per cent, respectively. The growth in the Mining & Quarrying industry was due to increased output from the JAMALCO plant which was closed in the comparable period of 2022.
• When compared to the fourth quarter of 2022, the total value added for the economy grew by 1.0 per cent. This was the result of a 1.5 per cent increase in the Services Industries and a 0.6 per cent fall in the Goods Producing Industries. The economy grew by 4.7 per cent for the fiscal year 2022/2023 compared to fiscal year 2021/2022.
• Meanwhile, the PIOJ estimates that the economy will grow within the range of 2.0 per cent to 3.0 per cent for the June 2023 quarter relative to the June 2022 quarter. The growth projection for FY2023/24 is within the range of 1.0 per cent to 3.0 per cent. All industries are projected to record growth, albeit at slower rates, as base effects wane.
• The downside risk to the projections include increased factory downtime, particularly in Mining and Quarrying industries, weather-related shocks that could affect agriculture, an intensification of geopolitical conflicts leading to a deterioration of supply side conditions and a lower than anticipated external demand for Jamaican goods and services as a result of slower than expected growth in the economies of Jamaica’s main trading partners.

(Source: STATIN)

• The United Kingdom (UK) business community is being encouraged to look to Jamaica for business opportunities. State Minister in the Ministry of Foreign Affairs and Foreign Trade, Hon. Alando Terrelonge, who met with business interests at the Jamaican High Commission in London recently, has indicated to the UK business community that the country is open for trade and investment.
• Touting the advantages, he said that “Jamaica enjoys a globally competitive business market, strong commercial laws, world-recognized ease of doing business, and Jamaica is more than sand and sea. Jamaica is a key destination for business, trade, and investment, with many benefits of doing business in a modern democratic nation with great political and economic stability.”
• He underscored that Jamaica has one of the best-performing stock markets in the world (rated the best by Bloomberg in 2015 and 2018), a highly profitable real estate market, sound macroeconomic policies, impressive vocational programmes to upskill employees, and has enjoyed successive quarters of economic growth.
• The State Minister noted further that the World Bank and the International Monetary Fund (IMF), have all given Jamaica positive ratings for its economic management, adding that the country has also received a B+ rating from global credit rating agency Fitch.
• Given these attractive conditions for investments, investors from the UK business community can take advantage of these opportunities that may drive positive yield on investments. Subsequently, Jamaica will benefit, as increased investments provide employment and increase domestic consumption, thus resulting in a win for both parties.

(Source: JIS News)

• The Government of Barbados recently announced an integrated package of innovative initiatives to accelerate its transition to net zero, boost resilience, enfranchise workers, and draw in private sector investment while prudently managing public debt levels.
• This package of initiatives reflects unprecedented cooperation and a new "system approach" between the Government, its Resilience and Sustainability Facility (RSF) at the International Monetary Fund (IMF) and Barbados' long-standing financing partners; Inter-American Development Bank (IDB), World Bank Group (WBG), Development Bank of Latin America and the Caribbean (CAF), European Investment Bank (EIB), and Green Climate Fund (GCF). 
• Particularly, in a first of its kind, the Government of Barbados has decided to use US$10Mn from the fiscal space created by the RSF as capital for a new Blue Green Bank.
• A green bank is a type of bank that is determined to use its resources of finances to help transition to more sustainable concepts, such as the use of renewable energy; and fight against climate change as a whole.
• Once established, the Blue Green Bank will help finance over US$250Mn of green investments in affordable homes, hurricane-resilient roofs, the electrification of public and private transport, and other Paris-aligned investments.
• Additionally, low-cost and long-term financing instruments from the EIB, CAF, IDB, GCF and RSF will support Government investment in resilient water and waste treatment infrastructure, and flood and coastal protection.
• Together, these initiatives will help Barbados meet its resilience objectives and protect its citizens, whilst helping transform the economy and protect its pristine natural environment.

(Source: International Monetary Fund)

• Indicators monitored by the Central Bank of Trinidad and Tobago show signs of a slow and steady recovery of the domestic economy in the first quarter of 2023, the latest Monetary Policy Announcement stated.
• Domestic inflation trended downward over the first five months of 2023. Headline inflation slowed to 5.7% in May 2023, compared with 6.0% one month prior and 8.7% in December 2022.
• Declining international food prices in tandem with easing local produce prices resulted in a decline in food inflation to 9.7% in May 2023, from 11.2% in April 2023 and 17.3% in December 2022.
• Core inflation, which excludes food prices, remained unchanged at 4.8% in May 2023 from the previous month but lower than the 6.7% recorded in December 2022. The outlook is for continued moderation in headline inflation, although adverse weather could lead to some spikes in local food crop prices.
• Additionally, there is some early evidence of improving labour market conditions based on observed increases in labour force participation in the third quarter of 2022 and the decline in the number of persons retrenched during the second half of 2022. The outlook for 2023, therefore, continues to look favourable, barring major external shocks.

(Sources: Central Bank of Trinidad and Tobago & Trinidad Express Newspapers)

• British banks agreed in June to give homeowners who miss mortgage payments a one-year grace period before foreclosing and to protect the credit scores of borrowers who change loan terms, as the government sought to ease the strain of rising interest rates.
• The new measures also allow borrowers to potentially change the terms of a mortgage - for example, to pay only interest, or to extend the repayment period - for up to six months without the lender undertaking fresh credit checks, in a move that could pose risks for banks in the longer run.
• Some of the measures announced by the government appeared to replicate policies banks have in place. The finance ministry statement said the newly agreed "mortgage charter" with banks offer tailored support to people struggling with repayments.
• Changes to Britain's mortgage market relative to interest rate changes have a less immediate impact on homeowners than they did in the past. This is because about 85% of mortgage holders are on fixed-rate deals, up from under 30% in the early 2000s.
• Most of those fixed rates only last for up to five years, unfortunately. Around 800,000 mortgages will need to be refinanced in the second half of this year, followed by a further 1.6 million in 2024, out of a total of around 9 million residential mortgages, industry body UK Finance said.

(Source: Reuters)

• Global factory activity slumped in June, business surveys showed on Monday, as sluggish demand in China and in Europe clouded the outlook for exporters. Across the Eurozone, manufacturing contracted faster than initially thought, as persistent policy tightening by the European Central Bank squeezed finances, and in Britain, the pace of decline steepened as optimism faded. Later on Monday, US ISM Manufacturing Purchasing Managers Index (PMI) data came in lower than expected (actual 46 vs. expected 46.9).
• "There are no real signs we are going to get any rebound in the manufacturing sector this year. On the whole we are still talking about a negative assessment," said Rory Fennessy, European economist at Oxford Economics on the eurozone release.
• Compiled by S&P Global, Hamburg Commercial Bank’s final eurozone manufacturing Purchasing Managers' Index (PMI) fell to 43.4 from May's 44.8. This is the lowest it has been since the COVID pandemic was cementing its grip on the world, below a preliminary reading and further from the 50 mark separating growth from contraction.
• The S&P Global/CIPS UK Manufacturing PMI also fell to 46.5 from 47.1 in May, its lowest reading this year and one of the weakest since the 2008-09 financial crisis.
• China's Caixin/S&P Global Manufacturing PMI eased to 50.5 in June from 50.9 in May, the private survey showed. This figure, combined with Friday's (June 30) official survey on China’s factory activity shows a steady decline in the manufacturing sector in China and it adds evidence to the fact the world's No. 2 economy lost steam in the second quarter.
• The impact is being felt in Japan where the final au Jibun Bank PMI fell to 49.8 in June, returning to a contraction after expanding in May for the first time in seven months. New orders from overseas customers decreased at the fastest rate in four months reflecting feeble demand from China. South Korea's PMI fell to 47.8 in June, extending its downturn to a record 12th consecutive month on weak demand in Asia and Europe. Factory activity also contracted in Taiwan, Vietnam and Malaysia, the PMI surveys showed.
• Asia is heavily reliant on the strength of China's economy, which saw growth rebound in the first quarter but subsequently fell short of expectations. The fate of Asia's economy, including China's, will have a huge impact on the rest of the world with aggressive monetary tightening also expected to weigh on U.S. and European growth.

(Source: Reuters)

• The Monetary Policy Committee (MPC), at its meetings on 27 and 28 June 2023, unanimously agreed to maintain the policy interest rate (the rate offered to deposit-taking institutions (DTIs) on overnight placements with Bank of Jamaica) at 7.0 per cent.
• The decisions were based on the MPC’s view that recent developments, including significantly reduced inflation over the past several months, were generally positive but the risks to the inflation outlook remained.
• Jamaica’s annual headline inflation rate at May 2023 of 6.1 per cent was just above the Bank’s target range but significantly lower than the 10.9 per cent at May 2022. Core inflation (which excludes food and fuel prices from the Consumer Price Index) at May 2023 of 4.2 per cent was also well below the outturn of 9.7 per cent at May 2022. The MPC’s decisions were therefore intended to ensure that Jamaica’s inflation rate continues to trend toward the target range of 4.0 to 6.0 per cent.
• Notably, the MPC’s decisions were based on a few key factors. The key external drivers of headline inflation such as grains, fuel and shipping prices, continued to decline and inflation expectations trended downward, such that the United States (US) Federal Reserve Board (Fed) paused its monetary tightening in June 2023 but suggested that interest rates could increase further.
• The MPC noted that the incoming data was generally positive but pointed out that the uptick in inflation above the target range is likely to continue for June and during the September 2023 quarter. This uptick is expected to be driven by recent increases in telephone and internet rates, the national minimum wage, seasonally higher agricultural prices as well as pending increases in other regulated prices such as transport.
• Consistent with global consensus forecasts for a further fall in certain commodity prices as well as the Bank’s overall monetary policy stance, and in the absence of new shocks, inflation is expected to decelerate to the Bank’s inflation target range of 4.0 to 6.0 per cent by the December 2023 quarter.
• In reviewing the impact of its previous monetary policy decisions, the MPC continues to see, in addition to a general lowering of inflation, a relatively strong, lagged pass-through of its policy rate to interest rates in the domestic money and capital markets and in the term rates offered on deposits by DTIs. The date of the next policy decision announcement is 18 August 2023.

(Source: BOJ)