• In its last policy meeting on February 28, the Banco Central de la Republica Dominicana (BCRD) decided to continue holding rates at 8.50%, in line with Fitch’s expectations.
• The central bank’s monetary board cited the broad decline in international prices for commodities like oil and food, as well as primary materials necessary for manufacturing. This easing price growth has been underpinned by government subsidies for gasoline, utilities, and food items, as well as slowing household consumption.
• Additionally, both headline and core inflation have shown a sustained decline since Q3 2022 towards the central bank’s inflation target range of 4.0% (+/- 1.0%). Despite pausing at a time when markets were pricing in a much more aggressive path for interest rates in developed markets, the Dominican peso has held up reasonably well.
• Therefore, Fitch expects that headline inflation will fall from an average of 8.8% y-o-y in 2022 to 5.6% in 2023, descending to 4.9% in 2024; and will give the BCRD scope to remain in pause mode.
• Looking forward, the central bank will likely start cutting rates in Q3 2023, setting the foundation for Fitch’s interest rate forecast of 7.50% by end-2023. However, the DR’s economy will see 3.8% GDP growth in 2023, far below the pre-pandemic average of 6.1% between 2015 and 2019, signalling that the previous elevated inflation rates have had the intended effect on domestic demand.

(Source: Fitch Solutions)

• China will make up a sizeable portion of the world’s demand recovery for oil as the global economy braces itself for a slowdown in the wake of interest rate hikes, Wood Mackenzie said. The research firm said in a Thursday report that it views China’s reopening as the “single biggest demand driver” for a recovery in oil demand this year — it expects the country will make up roughly 40% of the world’s recovery in demand for the commodity.
• “A return to normal mobility in China is the single biggest demand driver, accounting for 1.0 million barrels per day (b/d) of the 2.6 million b/d increase this year,” a team of analysts led by vice president Massimo Di Odoardo said in the report, laying out its base case scenario. That means 38.5% of global oil demand recovery would come from China.
• While Wood Mackenzie says private consumption will be the leading factor for a surge in China’s oil demand, it sees an upside to its base case scenario if economic growth were to be industry-led instead.
• According to the Chinese government’s latest work report, they have taken a very cautious approach to its growth prospects for this year. They have set a conservative GDP of 5%. It is important to note that China has a history of outpacing their government forecasts – in 12 of the past 18 years growth has exceeded the official target.
• Analysts at Oxford Economics, however, are of the view that government measures would have the opposite effect. They expect that Beijing’s focus on reining in local government debt problems will constrain infrastructure spending and, by extension, demand for commodities.

(Source: CNBC)

• Citigroup downgraded Europe's banking sector, warning the rapid pace of interest rate hikes will further weigh on economic activity and lenders' profits, and said it expects the region-wide equities index to remain near current levels by the end of the year.
• The Wall Street brokerage cut its rating on European banks to "neutral" from overweight" in a note dated Wednesday, saying the likely continued monetary policy tightening adds to worries stemming from the turmoil in the global banking sector.
• "The European banking sector's fundamentals look healthy. But the ongoing confidence crisis could limit banks' risk appetite and reduce the flow of credit," equity strategists led by Beata M Manthey said in the note.
• They, instead, prefer technology stocks and upgraded the sector to "overweight", citing healthy cash balances and several growth drivers.
• Citigroup trimmed its 2023 year-end forecast for the pan-European STOXX 600 index by more than 5% to 445 points, which represents a 0.4% downside from current levels. Citi also cut its forecast for UK's FTSE 100 index by 5%, now expecting the blue-chip index to end the year at 7,600 points, less than 1% higher than current levels.

(Source: Reuters)

• Barita Investments will be delisting from the Jamaica Stock Exchange, as part of its parent company’s, Cornerstone United Holdings Jamaica (CUHJL), re-organization exercise. The proposed plan to remove the shares of Barita from the Jamaica Stock Exchange comes after the Bank of Jamaica raised no objection to the re-organization of Cornerstone Group of Companies, of which Barita is a member.
• This is in a bid to address a regulatory concern, linked to the parallel ownership of Cornerstone Trust & Merchant Bank and Barita Investments Limited by Cornerstone shareholders. Cornerstone says, under the proposed new structure, Cornerstone Trust Mutual Bank (CTMB), Barita and Barita Unit Trust Management Company, will be held under Cornerstone United Holdings, which will see a new company being formed for this purpose.
• Barita's shares will be delisted from the Jamaica Stock Exchange, and shares of the newly formed financial holding company (FHC) will be listed in its place. Existing shareholders who own an equal number of shares in each of the Cornerstone entities will own one set of shares in Cornerstone Financial Holdings, post-merger.
• At the end of the process, Cornerstone United Holdings Jamaica will become the direct parent of Barita and CTMB. As a key part of the process, Cornerstone says an application will be made to the Supreme Court for meetings to be had with shareholders of the companies in the group that will be reorganized, for a vote on the Scheme to be executed.

(Source: RJR)

• Wigton Windfarm Limited (WIG), along with its joint venture partner, Innovative Energy Company, entered into a US$7,328,445.17 contract with the Ministry of Agriculture and Fisheries (MOAF) for the design, supply, and installation of distributive solar photovoltaic systems plus storage at certain Essex Valley Agriculture Development Project (EVADP) locations. 
• The Essex Valley Agricultural Development Project, which commenced in April 2017, aims to assist in the achievement of food security and the modernisation of the agricultural sector by increasing the area under formal irrigation in St. Elizabeth by 50%, and the yield of crops in Essex Valley to a minimum of 90% of their potential yield.
• On completion, more than 700 farmers operating on 810 hectares of land in the Essex Valley region will benefit from an irrigation system that will deliver 1,700 cubic metres per hour of water. The renewable energy plant to be supplied by Wigton Windfarm Limited will be used to power this irrigation system.

(Sources: JSE & JIS News)

• Trinidad and Tobago’s economy appears to be slowly on the mend, according to the latest stats released by the International Monetary Fund (IMF). 
• The IMF’s country report for the twin-island republic said in 2022, its real gross domestic product (GDP) expanded by 2.5%, supported by the non-energy sector and partially offset by an unexpectedly weaker performance of its energy sector. 
• Notably, inflation in T&T reached 8.7% at the end of last year, driven by imported energy and food prices, partial liberalization of domestic fuel prices in 2022, and domestic flooding.
• These higher-than-expected energy prices, however, resulted in the overall fiscal balance registering a surplus of 0.3% of GDP in FY2022, for the first time in over a decade, and after a record deficit of 11.7% of GDP in FY2020.
• Looking ahead, the organization stated that recovery is expected to gain broad-based momentum in 2023 with a 3.2% GDP expansion. However, over the medium term, as oil and gas fields mature, potential growth will slow down to 1.5%. The IMF lauded T&T for its prudent management of the energy revenue windfall and underscored the importance to continue rebuilding buffers.
• Inflation is projected to slow down to 4.5% by the end-2023 and will continue declining with international prices, which will result in a narrower current account surplus, averaging 6.7% of GDP. Its international reserve coverage is projected to remain adequate at around 6.5 months of prospective total imports by 2028.
• The risk to the growth outlook is tilted toward the downside. Downside risks stem from potential disruptions to domestic oil and gas production; a sharper-than-expected global slowdown affecting energy markets, and global financial instabilities. On the upside, there is the potential for higher-than-expected energy production and prices, including from a new U.S. license to Trinidad and Tobago to develop a major gas field in Venezuela.

(Source: IMF)

• Deputy Prime Minister Chester Cooper, who is in charge of tourism, investments, and aviation, announced that the government reached an agreement with a Bahamian-English consortium to undertake a $200Mn redevelopment of the Grand Bahama International Airport (GBIA).
• GBIA was damaged by Hurricane Dorian in September 2019. Its subpar state has been a hurdle for the economy of Grand Bahama. Following more than a year of negotiations with the US-based Electra Group, the government abandoned plans to sell and develop the Grand Lucayan resort. Cooper argued that to sell Grand Lucayan, GBIA must be fixed first to host US Customs and Border Protection Preclearance, which never returned after Dorian.
• The consortium will therefore “build, finance, operate, maintain and redevelop” the GBIA. Cooper stated that their mandate is to develop a resilient, efficient, commercially successful world-class airport.
• The project is expected to generate 1200 construction jobs. The UK Export Finance unit will provide financing for the project. The consortium is composed of Bahamas-based Aerodrome and British Manchester Airport Group Ltd and BHM Construction International.
• Investment planning is set to start immediately and the first phase of the project is scheduled for completion by Q1 2025. The second phase will last another three years.
• Once completed, the airport will be operated by Manchester Airport Group and profits generated by GBIA will go to an airport infrastructure fund.
• If confirmed, this will be good news for the Bahamas as it will aid in improving employment and tourists arrivals. However, the plan is still subject to environmental approvals as the airport location is exposed to natural elements, and has been damaged repeatedly by all major hurricanes that hit the Bahamas; so feasibility and environmental studies will be of the essence.

(Source: Oppenheimer)

• The Federal Reserve on Wednesday enacted a quarter percentage point interest rate increase, expressing caution about the recent banking crisis and indicating that hikes are nearing an end. Along with its ninth hike since March 2022, the rate-setting Federal Open Market Committee noted that future increases are not assured and will depend largely on incoming data.
• That wording is a departure from previous statements, which indicated “ongoing increases” would be appropriate to bring down inflation.  While comments Fed Chair Jerome Powell made during a news conference were taken to mean that the central bank may be nearing the end of its rate-hiking cycle, he qualified that the inflation fight isn’t over.
• Powell acknowledged that the events in the banking system were likely to result in tighter credit conditions, and the central bank’s tone has softened. Stocks initially rose after the Fed’s decision but slumped following Powell’s remarks.
• During the news conference, Powell said the FOMC considered a pause in rate hikes in light of the banking crisis but ultimately unanimously approved the decision to raise rates due to intermediate data on inflation and the strength of the labor market.
• The increase takes the benchmark federal funds rate to a target range between 4.75%-5%.

 (Source: CNBC)

• U.S. existing home sales rebounded more than expected in February as lower mortgage rates and the first year-on-year decrease in prices in 11 years pulled buyers back into the market, further evidence that the housing market was stabilizing at low levels. The jump in sales of previously owned homes, which was reported by the National Association of Realtors on Tuesday, was the largest in more than 2-1/2 years and ended 12 straight monthly declines in sales, the longest such stretch since 1999.
• U.S. existing home sales rebounded more than expected in February as lower mortgage rates and the first year-on-year decrease in prices in 11 years pulled buyers back into the market, further evidence that the housing market was stabilizing at low levels. The jump in sales of previously owned homes, which was reported by the National Association of Realtors on Tuesday, was the largest in more than 2-1/2 years and ended 12 straight monthly declines in sales, the longest such stretch since 1999.
• The housing market has been the biggest casualty of the aggressive interest rate hikes delivered by the Federal Reserve in its battle to tame high inflation. The surge in sales added to data on housing starts and homebuilder confidence in suggesting that the housing market was probably finding a floor.
• Economists polled by Reuters had forecast home sales would rebound 5.0% to a rate of 4.20 million units. Home resales, which account for a big chunk of U.S. housing sales, fell 22.6% on a year-on-year basis in February.
• Residential investment has contracted for seven straight quarters, the longest such streak since the collapse of the housing bubble triggered by the 2007-2009 Great Recession.
• Mortgage rates, which in February resumed their upward trend, are falling again in tandem with a sharp decline in U.S. Treasury yields following the recent collapse of two U.S. regional banks that sparked fears of contagion in the banking sector. But the outlook for the housing market remains unclear. Despite financial market instability, the Fed is expected to raise interest rates by another quarter of a percentage point on Wednesday, according to CME Group's FedWatch tool.

(Source: Reuters)

• The State-owned National Water Commission (NWC) is now less of a fiscal risk to the Government, says Prime Minister, the Most Hon. Andrew Holness. He told the House of Representatives, during his 2023/24 Budget Debate presentation on Thursday (March 16), that over the last financial year, the NWC recorded significant achievements at the strategic and operational levels, resulting in a “stronger, more robust utility, able to better carry out its mandate”.
• “NWC’s financial performance has shown a worthy turnaround, moving from a net loss of $2.13Bn in the 2021/22 financial year to a net year-to-date profit of $2.73Bn as of January 2022/23. This performance means that the NWC is now much less of a fiscal risk to the Government,” the Prime Minister said.
• More than $7Bn of capital investment will be made in fiscal year 2023/24 to support NWC projects, now underway, either in construction or procurement. Additionally, 21 other islandwide water supply upgrading and expansion projects are programmed for the upcoming fiscal year, with a projected expenditure of more than $2.5Bn. This will see the NWC’s services being extended to new communities.
• Prime Minister Holness said that in the new fiscal year, the NWC will spend more than $900Mn to ensure more efficient pumping operations while deploying more renewable energy within its operations. Additionally, a public-private partnership project was launched last year, which will see a floating photovoltaic system being built at the Mona Reservoir in St. Andrew. The project will result in an investment of more than US$68Mn, 45MW of Firm Capacity and will save the NWC over $1Bn annually. The test phase has been completed, with full construction set to commence in May 2023.

(Source: JIS)