• A global tax collection framework could be in place by the end of 2024. Speaking at a forum at the DunnCox Law firm, Finance Minister Dr. Nigel Clarke said, as the agreement is being finalised, countries could begin signing on to the treaty as soon as this quarter.
• 138 countries have agreed in principle and the multilateral convention that will give legal effect to these arrangements. The treaty will be open for signing in September and countries will have through all of 2024 to sign this treaty.
• He noted that this period is required as countries must ensure that aspects of their domestic legislation, which in some cases may be thousands of pages long, are compatible with the treaty details. With globalisation opening opportunities for several firms to earn in multiple territories, this has caused some taxation concerns.
• There has however been some global consensus on how to address this, with the Pillar One solution created through the Organization for Economic Co-operation and Development (OECD).
• Clarke explained that the solution calls for about 87 global companies, who are in 'scope'. On an annual basis, there will be a mechanism to reallocate the taxing rights and the profits that they generate globally to all countries around the world. Once accepted, more than US$200 billion in tax revenues could be distributed to signatories across the world, from several multi-national firms. 
• However, there are concerns as the proposed changes could negatively affect small and developing countries, as some states which offer a lower tax rate to attract investors, may lose their appeal.

(Source: RJR News)

• In line with Fitch Solutions' expectations, the Mexican economy expanded by 0.9% on a q-o-q basis (3.6% in annualised terms) in Q223.
• Growth largely matched Q123’s impressive 1.0% rate, which helped to keep the y-o-y rate steady at 3.7% (Bloomberg consensus: 3.4%).
• No expenditure breakdown is available yet, but the high-level sectoral figures published by the Mexican statistics office showed that growth was reasonably broad-based. The tertiary sector performed particularly strongly (+1.0% q-o-q, 4.1% annualised), aided by tight labour market conditions and easing inflation.
• With this new data being in line with expectations, Fitch continues to forecast that the Mexican economy will grow by 3.0% this year and 1.6% in 2024, with risks to both of these projections, tilted to the upside.
• Fitch has recently revised sharply higher US real GDP growth projection (from 1.6% to 2.1%), reflecting the updated view that the economy is unlikely to fall into recession until Q224. For Mexico, this implies that activity in export-oriented sectors will continue to hold up reasonably well, remittances will remain solid, and strength in inward FDI flows will persist.
• Growth should still slow as the Mexican peso’s rapid appreciation is more noticeably felt over H223, while there is a risk the Banxico rate cuts that were currently pencilled in for Q423 will be pushed to 2024. That said, even with these headwinds the deceleration may not be as sharp as Fitch’s forecast implies. The company, therefore, noted that they would be updating their projections in light of incoming data before end-Q323.

(Source: Fitch Solutions)

• Barbados’ economy has grown for the ninth consecutive quarter, expanding by 3.9% in the first six months of the year.
• However, Central Bank Governor Dr Kevin Greenidge stressed that for the country’s economic fortunes to continue improving, there is a need for a major injection of investment, especially from the private sector.
• The economy is expected to grow by between 4%-5% overall this year, with a boost expected in the coming months from the return of a full Crop Over Festival itinerary and the anticipated opening of the Wyndham Sam Lord’s Hotel.
• That being said, Barbados’ growth forecast hinges on a somewhat strong performance in the tourism sector to drive broader economic activity through channels such as direct employment, and service exports, along with construction and agriculture and fisheries.
• The diversification of other revenue streams and foreign direct investments in the sovereign is therefore needed to ensure the economic rebound of Barbados.

(Source: Nation News)

• Most major brokerages do not expect a sustained drag on U.S. financial markets following Fitch's move to strip the country of its top credit rating, noting that the economy is stronger now than in 2011 when S&P Global downgraded U.S. sovereign debt.
• Stock index futures fell, with Nasdaq futures down 0.7%, while Treasury yields slid by 3 basis points. The dollar climbed 0.2%, after slipping broadly in the wake of the downgrade.
• Fitch Ratings on Tuesday cut its rating on U.S. long-term foreign-currency debt by one notch to 'AA+', citing fiscal deterioration over the next three years and repeated debt ceiling negotiations that threaten the government's ability to pay its bills.
• "Investors have lived through the S&P downgrade in 2011 and remember coming away unscathed. Another might be that people have gotten used to an elevated level of deficit spending," said Steven Zeng, strategist at Deutsche Bank. "We see the market impact from the downgrade news as ultimately limited, and Friday's jobs report could trump the downgrade news as monetary policy is still the dominant driver for yields."
• Data released last week showed the U.S. economy grew faster than expected in the second quarter as a resilient labour market supported consumer spending, with markets now pricing in a soft-landing scenario for the economy despite rapid interest rate hikes by the Federal Reserve.
• J.P.Morgan also noted that the spending cuts that ended the debt ceiling crisis of 2011 reduced federal spending by 0.7% of Gross Domestic Product (GDP) the following year, while the deal signed into law earlier this year is expected to lower federal spending by less than 0.2% of GDP next year.
• Markets took comfort when Fitch did not adjust U.S. "country ceiling", which it affirmed at AAA, showing strength in the ability of the corporate sector to convert local currency into a foreign currency for debt repayments.
• Moody's still holds a 'Aaa' rating on U.S. government debt. In a review in July, it cited economic strength, "extraordinary" funding capacity, and "central roles of the U.S. dollar and the U.S. Treasury bond market in the global financial system."

(Source: Reuters)

• British factory output contracted in July at the fastest pace in seven months, hit by higher interest rates and fewer new orders, despite weakening price pressures, a survey showed on Tuesday.
• The S&P Global/CIPS UK manufacturing Purchasing Managers' Index (PMI) fell to 45.3 in July from 46.5 in June, the lowest reading this year and the joint-weakest since May 2020, but above the 45.0 estimate in provisional PMI data.
• July's reading marked the 12th month in a row the PMI has been below 50. A reading above 50 signals growth in activity. The most recent official data showed factory output fell 1.2% in the year to the end of May.
• Rob Dobson, a director at S&P Global Market Intelligence, said the manufacturing downturn deepened in July, compounded by higher interest rates, customers with too much stock and weaker overseas demand. However, more than half of manufacturers expect output to rise over the coming 12 months.
• Demand continued to slow in July, with new domestic orders falling for the fourth month running and at the quickest rate since December. Overseas orders contracted at the steepest pace since November.
• Costs paid by manufacturers for materials and energy declined for the third consecutive month, while prices charged by factories were almost unchanged from June.
• The Bank of England, which is expected to deliver its 14th interest rate hike on Thursday, is closely monitoring indicators of price pressures as it judges how many more rate hikes are needed to control British inflation, which was 7.9% in June, the highest among major advanced economies.
• S&P Global's measure of future production improved slightly from the six-month low it hit in June, and employment contracted for the 10th month in a row.
• A final reading for the much larger services sector is due on Thursday.

(Source: Reuters)

• For June 2023, output prices for producers in the Mining and Quarrying industry increased by 1.2% while prices in the Manufacturing industry increased by 0.2% as indicated by data released by the Statistical Institute of Jamaica (STATIN).
• The increase in the index for the Mining and Quarrying industry in June was attributed to a rise in the index for the heavier-weighted major group ‘Bauxite Mining & Alumina Processing’ of 1.2%. The index for the other major group, ‘Other Mining & Quarrying’, moved up by 0.3%. A depreciation of the Jamaican dollar vis-à-vis the United States of America dollar also aided in the increase in the Index.
• The main contributors to the increase in the Manufacturing industry were the major groups, ‘Refined Petroleum Products’ (0.9%) and ‘Paper and Paper Products’, which increased by 2.0%. These increases were driven by higher petroleum commodities and higher production costs, respectively. Tempering the upward movement of the industry was a decline of 0.1% in the index for the major group ‘Food, Beverages & Tobacco’ and ‘Chemicals and Chemical Products’ down by 0.5%. The decline in the former group was due to a decline in the index for the group ‘Manufacture of Grain Mill Products, Starches and Starch Products’, a result of lower prices for wheat on the international market, while the fall in the index of ‘Chemicals and Chemical Products’ was driven by a reduction in freight and packaging costs.
• For the period June 2022 - June 2023, the index for the Mining & Quarrying industry decreased by 4.6% mainly due to a 4.9% fall in the index for the major group 'Bauxite & Alumina Processing’. For the same period, the index for the Manufacturing industry decreased by 3.3% mainly as a result of a decline of 26.8% in the index for the ‘Refined Petroleum Products’ major group. However, the decline in the index for the industry was moderated by an increase of 3.0% in the index for the heaviest-weighted major group ‘Food, Beverages & Tobacco ‘
• The Producer Price Index (PPI) is a significant economic indicator that tracks the average fluctuation in selling prices that domestic producers of goods and services experience over time. There was a minor dip in the PPI in June, however, the decision by OPEC+ to curtail oil supply could potentially escalate producer prices. This is due to the fact that a reduction in oil supply could drive up costs related to transportation and electricity. However, the supply cut has failed to significantly influence oil prices thus far.
• The recent development of Russia backing out of the grain deal could indeed have implications for food prices, and subsequently, the PPI. If the withdrawal from the deal leads to a shortage in grain supply, it could drive up the cost of grain-based products. This could result in an increase in the index for the major group 'Food, Beverages & Tobacco', thereby influencing the overall PPI. However, the extent of this impact would depend on the severity of the grain shortage and the responsiveness of the market to these changes.

(Source: STATIN)

• The Dominican Republic's Ministry of Economy, Planning, and Development has released the “Macroeconomic Situation Report: Situation Monitoring” for June 2023. The report reveals that the Monthly Indicator of Economic Activity (IMAE) experienced a year-on-year growth of 2.4% in May, surpassing the growth rates recorded in the first four months of the year. The IMAE's cumulative growth for the initial five months of 2023 stood at 1.4%.
• This positive economic performance is attributed to the successful implementation of coordinated expansionary monetary and fiscal measures, bolstering the country’s robust macroeconomic fundamentals.
• As for growth projections, the real GDP is expected to grow by 4.0% in 2023, and economic agents forecast a growth rate of approximately 5.0% for 2024, indicating a promising outlook for the Dominican economy.
• In terms of inflation, the report states that it was within the target range (around 4.0% - the mid-point of the target range) established in the monetary program for June, with a year-on-year variation of 4.00%. This rate is the lowest recorded since July 2020. Core inflation, which excludes volatile items, registered an interannual variation of 5.33%.
• Since May, the Central Bank has embarked on a monetary easing process. Analysts predict a continued reduction in the policy rate on a gradual basis, with a cumulative cut of 75bps expected by the end of the year. Further reductions in 2024 will depend on the overall inflation dynamics, particularly the impact of the recent surge in food commodity prices on domestic inflation.
• The report also highlights the groups that contributed to attenuating the variation in the price index for June, particularly in the Housing and Transportation categories, which experienced negative variations and incidences in the overall inflation rate.

(Source: Dominican Today)

• Bahamian insurers have warned they, and thousands of businesses and homeowners will face “tremendous economic hardship” if 35 per cent of reinsurance capacity is lost by The Bahamas failing to escape Europe’s tax blacklist.
• Major property and casualty underwriters told Tribune Business that The Bahamas is running out of time to exit the European Union’s (EU) non-cooperative list, and in effect has only one shot at achieving such an outcome through this October’s review, if it is to secure continued German reinsurance support that is “critical” to maintaining coverage for key real estate, auto and other assets.
• Anton Saunders, RoyalStar Assurance’s managing director, explained that reinsurers such as Munich Re will be prevented by German law from receiving tax relief or deductions on hurricane-related claims payouts to The Bahamas if this country still remains on the 27-nation EU’s blacklist after the October review.
• Given that such payouts will likely be worth hundreds of millions of dollars if a Dorian-strength storm strikes a major Bahamian island, the loss of such tax relief might deter German reinsurers from continuing to support local carriers such as RoyalStar by underwriting the bulk of this nation’s risks.
• Such a scenario, if it happens, would occur at the worst possible time given that reinsurance capacity and willingness to underwrite risks in the disaster-prone Caribbean is at a near 30-year low.
• Premium prices would be sent skyrocketing even further if Bahamian insurers lose German reinsurance support if the Bahamas fails to exit the EU’s blacklist. Timothy Ingraham, Summit Insurance Company’s managing director, noted that the loss of such backing would likely force all local property and casualty underwriters to halt taking on any new business.
• Both Prime Minister Philip Davis KC and Ryan Pinder KC, the attorney general, have in recent weeks blasted the EU for subjecting the Bahamas to demands it refuses to impose on its own members even though the likes of Luxembourg are viewed by many as far greater offenders when it comes to tax transparency.

(Source: The Tribune) 

• Global growth is projected to improve from an estimated 3.5 per cent in 2022 to 3.0 per cent in both 2023 and 2024. While the forecast for 2023 is modestly higher than predicted in the April 2023 World Economic Outlook (WEO), it remains weak by historical standards.
• The rise in central bank policy rates to fight inflation continues to weigh on economic activity. Global headline inflation is expected to fall from 8.7 per cent in 2022 to 6.8 per cent in 2023 and 5.2 per cent in 2024. Underlying (core) inflation is projected to decline more gradually, and forecasts for inflation in 2024 have been revised upward.
• The recent resolution of the US debt ceiling standoff and, strong action by authorities to contain turbulence in US and Swiss banking earlier this year, these occurrences have reduced the immediate risks of financial sector turmoil. This moderated adverse risks to the outlook. However, the balance of risks to global growth remains tilted to the downside.
• Inflation could remain high and even rise if further shocks occur, including those from an intensification of the war in Ukraine and extreme weather-related events, triggering more restrictive monetary policy. Financial sector turbulence could resume as markets adjust to further policy tightening by central banks. China’s recovery could slow, in part as a result of unresolved real estate problems, with negative cross-border spillovers. Sovereign debt distress could spread to a wider group of economies. On the upside, inflation could fall faster than expected, reducing the need for tight monetary policy, and domestic demand could again prove more resilient.
• In most economies, the priority remains to achieve sustained disinflation while ensuring financial stability. Therefore, central banks should remain focused on restoring price stability and strengthening financial supervision and risk monitoring. Should market strains materialize, countries should provide liquidity promptly while mitigating the possibility of moral hazard. They should also build fiscal buffers, with the composition of fiscal adjustment ensuring targeted support for the most vulnerable. Improvements to the supply side of the economy would facilitate fiscal consolidation and a smoother decline of inflation toward target levels.

(Source: IMF)

• The U.S. economy grew faster than expected in the second quarter as a resilient labour market supported consumer spending, while businesses boosted investment in equipment and built more factories, potentially keeping a much-feared recession at bay. The Fed on Wednesday raised its policy rate by 25 basis points to the 5.25%-5.50% range.
• Despite the broad-based acceleration in growth reported by the Commerce Department on Thursday, inflation subsided considerably last quarter, with one of the key measures tracked by the Federal Reserve for its 2% target posting its slowest increase in more than two years.
• Economists, some of whom have been forecasting a recession since 2022, believed the U.S. central bank's fastest interest rate hiking cycle since the 1980s was drawing to a close, though strong domestic demand could see it keeping borrowing costs higher and for longer.
• "Despite the Fed's campaign to slow growth and snuff out inflation, no recession is in sight," said Sung Won Sohn, a finance and economics professor at Loyola Marymount University in Los Angeles. "Stop raising rates for now."
• Gross domestic product increased at a 2.4% annualized rate last quarter, the government said in its advance estimate of second-quarter GDP. The economy grew at a 2.0% pace in the January-March quarter. Economists polled by Reuters had forecast GDP would rise at a 1.8% rate in the April-June period.
• The government's measure of inflation in the economy, the price index for gross domestic purchases, rose at a 1.9% rate, the slowest in three years. This followed a 3.8% pace increase in the first quarter.
• Even more encouraging, the personal consumption expenditures price index (PCE) excluding food and energy advanced at a 3.8% rate. That was the smallest gain since the first quarter of 2021 and was a slowdown from the 4.9% pace logged in the January-March quarter. The Fed watches the PCE price indexes for monetary policy.
• Outside housing and manufacturing, the economy has largely weathered the 525 basis points in rate hikes from the Fed since March 2022. Most economists are now confident the "soft landing" scenario - in which inflation falls, unemployment remains relatively low and a recession is avoided - is feasible.

(Source: Reuters)