• The International Monetary Fund (IMF) on Tuesday lowered its 2022 economic growth forecasts for Latin America and its two largest economies- Mexico and Brazil, citing inflation, tighter monetary policy and a lower growth estimate for the United States as keys to the downgrades. 
• The IMF reduced its growth expectations for Mexico and Brazil by 1.2 percentage points each to 2.8% and 0.3%, respectively, while the estimate for Latin America and the Caribbean was cut by 0.6 percentage point to 2.4%. 
• The IMF in its World Economic Outlook for Brazil posited that "the fight against inflation has prompted a strong monetary policy response, which will weigh on domestic demand". The benchmark Selic interest rate, which is the Brazilian federal funds rate, was hiked 725 basis points in less than a year to the current level of 9.25%. Although necessary to contain inflation, the higher rates will result in an increase in the borrowing cost, which will reduce consumer spending and investment, leading to lower economic growth. 
• The IMF also reported that Mexico will be slightly affected by inflation and higher rates, compounded by an expected drop in output growth from the United States, its most important trading partner.

 (Sources: Reuters & NCBCM Research)

• Rising interest rates and decelerating economic growth will slow the pace of loan growth in the Brazilian banking sector in 2022. Loan growth is expected to decline from 18.7% last year to 8.4% at end of 2022, according to Fitch. 
• Brazil’s banking sector saw substantial growth in their loan portfolios in 2021, bringing loans to GDP to an estimated 72.9%, an all-time high. This continued the strong growth from 2020, fueled by fiscal stimulus aimed at mitigating the economic impact of the pandemic and loose monetary policy in H1 2021, which supported lending to firms and households to cover income losses. 
• At the same time, asset and deposit growth will slow from 10.5% and 9.3%, to 9.7% and 5.7%, respectively, over the same time period. Higher net interest margins will bolster the sector’s profitability, although rising debt servicing costs pose a downside risk to asset quality. 
• Over the course of 2021, households were the driving force behind overall loan growth and while households will likely remain the driving force behind loan growth in 2022, Fitch expects overall demand will decline in 2022, as rising debt serving costs will reduce households’ willingness to take on new debt and elevated inflation will erode the value of wages.

 (Source: Fitch Solutions)

• The International Monetary Fund cut its world economic growth forecast for 2022 as the Covid-19 pandemic enters its third year, citing weaker prospects for the U.S. and China along with persistent inflation. 
• The world economy expanded 5.9% last year, the IMF estimated, the most in four decades of detailed data. That followed a 3.1% contraction in 2020 that was the worst peacetime decline in broader figures since the Great Depression. The global economy will expand 4.4% this year, down from an estimate of 4.9% in October 2021, the Washington-based IMF said in its World Economic Outlook on Tuesday. 
• The lower forecasts comes on the back of an expected fall-off in economic activity from the world’s largest economies. The U.S., the world’s largest economy, saw its forecast cut on the outlook for President Joe Biden’s Building Back Better spending agenda, earlier withdrawal of monetary accommodation, and continued supply shortages. China, the second-biggest, is experiencing pandemic-induced disruptions related to the zero-tolerance COVID-19 policy and protracted financial stress among property developers. 
• IMF forecasts 3.8% growth for 2023, up from the prior projection of 3.3%. The upward revision to global growth in 2023 is mostly mechanical. Eventually, the shocks dragging 2022 growth will dissipate and, as a result, global output in 2023 will grow a little faster. 
• The general theme across the regions is that growth will slow for 2022. Central banks that slashed interest rates to soften the economic decline caused by the pandemic, are now facing pressure to tighten policy to confront surging consumer prices, threatening to curtail the growth rebound. Governments also have less fiscal space for spending to address health needs and buoy their economies after piling up record debt. 

 (Sources: Bloomberg & NCBCM Research)

•  Oil prices rose on Tuesday on concerns supplies could become tight due to Ukraine-Russia tensions, threats to infrastructure in the United Arab Emirates and OPEC+ struggling to hit its targeted monthly output increase. 
• Analysts noted that oil price rise came despite a drop in equities markets and the possibility of an interest rate hike by the U.S. Federal Reserve on Wednesday. Brent futures rose $1.14, or 1.3%, to $87.41 per barrel, while U.S. West Texas Intermediate (WTI) crude rose $1.21, or 1.5%, to $84.52/b. 
• "The oil complex is advancing on continued supply tightness and geopolitical risk, but the decline in equities and strong dollar are bearish," Jim Ritterbusch, president of energy advisory firm Ritterbusch and Associates, said in a note. 
• The United States is in talks with major energy-producing countries and companies around the world over a potential diversion of supplies to Europe if Russia invades Ukraine, senior Biden administration officials said. 
• Also fueling supply concerns is the difficulty encountered by OPEC+, which comprises the Organization of the Petroleum Exporting Countries along with Russia and other producers, with efforts to hit its targeted monthly output increase of 400,000 barrels per day beginning February. 

 (Source: Reuters)

• Minister of Agriculture and Fisheries, Hon. Pearnel Charles Jr. says Jamaica’s food security is a top priority for the Government. He further highlighted that there is global demand for Jamaican produce, adding that the Government is seeking to increase local production of several crops, particularly onion. 
• The Ministry has set a target of increasing onion production from 20% to 70% to meet local demand. Additionally, there are other crops that the government will focus on in order to reduce its import bills such as Ginger and Potatoes. 
• According to the Minister, the “first order is that Jamaica should be able to feed itself, feed its tourists, and then go out and stretch across the world,” Mr. Charles Jr said. He further noted that agriculture is a critical component of the country’s economic recovery, urging Jamaicans to take advantage of emerging opportunities in the sector. 
• Food security has a positive impact on economic growth through poverty reduction, increased total employment and an improvement in life expectancy. This will therefore enhance and support Jamaica’s economic recovery in 2022.

(Sources: JIS News & NCBCM Research)

• In 2022, every major regional central bank across Latin America is expected to continue the rate hiking cycles that began in 2021. In response to elevated inflation, this week’s data prints and monetary policy decisions from Brazil and Mexico will shed more light on the likely pace and magnitude of the coming rate hikes across the region. 
• Brazil’s inflation is likely to decelerate in January slightly from the 10.4% y-o-y (0.8% m-o-m) pace seen in December 2021, though the rate of price growth is likely to remain above 10.0% in January and much of H1 2022. Fitch forecasts that Banco Central do Brazil (BCB) will hike its benchmark interest rate to 10.75% in Q1 2022, holding it through the end of the year, but January’s inflation print could pose risks to the upside of this forecast. 
• Mexico’s inflation weakened slightly in the second half of December, to 7.26% y-o-y (0.01% m-o-m). It is expected that price growth will continue to decelerate towards 7.00% in the first half of January. If inflation surprises to the upside, it will put additional pressure on the Bank of Mexico (Banxico) to potentially step up its rate hiking cycle. The Agency projects Banxico will hike from 5.50% currently to 6.50% at end-2022. 
• Given the contractionary activity in October (-0.7% y-o-y), only a slight recovery in economic activity is expected in November, though the overall economy will remain relatively weak. Fitch estimated a 5.6% growth in Mexico in 2021, decelerating to 2.8% in 2022.

 (Source: Fitch Solutions)

• The US-based Center for Disease Control and Prevention (CDC) has added Saint Lucia and 22 other countries to its highest warning Level 4 list, making them countries to avoid visiting because of rising cases of COVID-19. The CDC advises that Level 4 countries should be avoided, and that persons who insist on traveling to those countries must be fully vaccinated. This development will likely deter short-term travel and undermine the recovery in the country’s tourism sector. 
• The arrival of the Omicron variant has increased the perceived risk of travel to several countries. Many countries paused travel from several African countries after the Omicron variant was discovered, resulting in damaging effects to the tourism sector in a dozen nations in the region. 
• Heavily tourism-dependent Saint Lucia and other Caribbean nations, added to the “No Go” list for American travellers, are doing their best to keep cruise ships and flights coming, while implementing tough safety standards, including medical declarations covering COVID conditions of all passengers and crew, 24-hours before arrival. 
• Ships have been prevented from entering and docking in Port Castries, where there are known cases of unacceptable levels of Covid infections on board. However, while acknowledging that such news is “bad for the industry”, the cruise lines and Caribbean tourism officials have been cooperating to their mutual benefits. The number of cruise ships calling into Saint Lucia continues unabated since the Level 4 travel warnings by the CDC.

 (Sources: St. Lucia News Online & NCBCM Research)

• The Bank of Canada (BoC) is expected to begin raising its benchmark interest rate from 0.25% currently, in Q1 2022 as the central bank unwinds stimulus implemented during the Covid-19 pandemic and inflation remains above target. 
• In 2021, the BoC held at 0.25% throughout the year, but wound down its asset-purchasing programme in October, in contrast with the ongoing quantitative easing conducted by the US Federal Reserve (Fed), the European Central Bank and the Bank of Japan. 
• In December 2021, seasonally adjusted inflation rose to 4.8% y-o-y, a multi-decade high. While Fitch forecast inflation will slow throughout 2022 and end the year at 2.3% as supply chain disruptions easeand commodity prices fall, the central bank will likely hike in H1 2022 to help contain inflation expectations. 
• The agency forecasts that the BoC will hike to 1.00% by end-2022 and 1.50% by end-2023, a more hawkish view from previous forecasts of a single 25 bps hike each year. 
• Risks to Fitch’s view are weighted to the upside, particularly if the US Federal Reserve raises the fed funds rate at a faster pace than is currently expected or inflationary pressures persist throughout 2022. 

(Source: Fitch Solutions)

• There is "a great deal of uncertainty" over how long inflation will remain well above the European Central Bank's target of around 2%, ECB Governing Council member Robert Holzmann said in an interview with newspaper Die Presse that was published on Sunday. 
• The ECB has long held the view that inflation will decline this year from its current record high, an expectation its President Christine Lagarde repeatedon Friday. 
• Eurozone inflation hit 5% in December, more than twice the ECB's target, but the bank sees it back below 2% by the fourth quarter. "It is not yet ruled out that that will happen. However, we also do not know whether inflation will stay at a higher level after all," Holzmann, who is governor of the Austrian National Bank, told Die Presse. 
• Second-round effects like wage increases would be decisive, he added and, like Lagarde, he said that for now there was no sign of a price-wage spiral, but much would depend on wage negotiations this year. 
• "Fundamentally there is, therefore, the danger of a wage-price spiral. I believe, however, that labour and employer representatives are acting very rationally and thoughtfully here," Holzmann said.

 (Source: Reuters)

• The competitiveness of a tourism destination requires an effective human capital management plan, where the workforce becomes the primary focus as stated by Jamaica’s Minister of Tourism, Edmund Bartlett. 
• Against this background, the Tourism Ministry has established the Jamaica Centre of Tourism Innovation (JCTI) as the primary platform to build a quality tourism workforce that can access attractive jobs that offer decent work, social protection, and upward social mobility. 
• This process starts from secondary schools where the Tourism Enhancement Fund (TEF) is collaborating with the Ministry of Education and Youth on a training and certification programme for tertiary and secondary-school students as part of Government’s Human Capital Development strategy to ensure the sustainable development of tourism 
• The JCTI also focuses on offering middle management certification programmes covering Certified Food and Beverage Executive (CFBE), Certified Hospitality Housekeeping Executive (CHHE), Certified Hospitality Trainer (CHT), and Certified Hotel Concierge (CHC). 
• These initiatives under the JCTI will aim to increase service quality in the tourism sector which will add to the overall attractiveness of Jamaica’s tourism product.

(Sources: Cointelegraph.com)