• The Bank of Jamaica’s Financial Policy Committee (FPC) issued a statement on April 30, 2023, regarding its review of the financial system’s performance for 2022 published in its annual financial stability report.
• According to the committee, the Jamaican economy had recovered to its pre-pandemic output levels towards the end of 2022, with real economic activity for the year was estimated to have expanded between 4.5% and 5.5%.This was mainly due to the strong recovery in the tourism and manufacturing sectors. The recovery contributed to improvements in key macroeconomic indicators such as the unemployment rate and public sector indebtedness.
• Furthermore, in an effort to stem rising inflation, central banks across the world, including the BOJ, tightened monetary policy in 2022. “Stress tests were carried out on the various financial sub-sectors in order to evaluate their resilience to adverse scenarios involving further increases in interest rates and the spill-over effects of an external recession on the Jamaican economy. The results showed that the financial system remained broadly resilient to these shocks.”, the statement noted.
• In addition, the committee indicated that despite the highly interconnected interbank funding network, simulation results suggested a low level of spill-over and contagion risks in response to the recent international bank failures.
• Overall, the BOJ's Financial Policy Committee's statement provided a positive outlook on the state of Jamaica's economy and financial system while also acknowledging the need for continued vigilance and proactive measures to maintain stability and promote growth.

(Source: BOJ)

• The Government has recommitted to increasing the budget for restoration work on the Cornwall Regional Hospital (CRH) in Montego Bay, St. James, to $14.1Bn. Prime Minister, the Most Hon. Andrew Holness, reaffirmed this while addressing journalists following a tour of the Type A facility on Saturday (April 1).
• Initially, $5Bn was allocated towards the rehabilitation work, which began in 2019 and was intended to be executed in multiple phases. However, several issues were identified as the project progressed, necessitating the need for further specialized skills and talents to complete the reconstruction process that has now entered phase three.
• The Prime Minister assured the public that the completed rehabilitation process will result in a world-class hospital that can rival any hospital globally, and it will likely be the leading hospital in the English-speaking Caribbean. The anticipated completion date for the CRH's rehabilitation is March 2025.
• The CRH along with the Western Children and Adolescents Hospital, being built on the compound at a cost of US$43Mn, will offer state-of-the-art services and facilities to the citizens of St. James and, by extension, western Jamaica.

(Source: JIS News)

• The Bahamas must focus on “how we grow from here” because returning to pre-COVID’s $13Bn economic output is “not sufficient to take the ship of state forward”, a governance reformer argued.
• Hubert Edwards, head of the Organisation for Responsible Governance’s (ORG) economic development committee, told Tribune Business that The Bahamas’ “comeback” from the depths of the COVID pandemic in less than three years should not be diminished or ignored.
• The Bahamas National Statistical Institute (BNSI) unveiled data showing 2022’s real gross domestic product (8%) was slightly higher than that of the last COVID-free year of 2019 (1.6%); however, there was already consensus that this level of economic output is still some $3Bn short of what is required to meet the country’s economic and fiscal objectives.
• With the Government seeking to increase its revenue-to-GDP ratio to 25% by the 2025-2026 fiscal year (from 20.2% in FY 2021/22), and the recently-published Fiscal Strategy Report setting targets for a near-$16Bn nominal GDP and $4Bn in annual government revenues by 2027, Edwards expressed that achieving these goals should now be the priority for policymakers.
• Notably, the targeted $16Bn nominal GDP for the 2026-2027 fiscal year means the Bahamian economy has to expand by just over $3Bn in four years if that goal is to be achieved. And government revenues will have to increase by $1.2Bn over the same time period to strike the $4Bn mark.
• This begs the question of whether this growth will be achievable given that the nation has not seen a sufficient change in prior infrastructure, policies, and the system in recent times and whether tourism has the legs to move the nation beyond that point.

(Sources: CariCris & The Ministry of Finance (Bahamas))

• At its board meeting on March 30, BanRep of Colombia raised its policy interest rate by 25 basis points to 13.00%, which was in line with Fitch's and general expectations.
• The vote was unanimous among all seven board members. The preliminary press release from the meeting cited easing food and drinks price inflation (24.1%) y-o-y in February compared to 27.8% in December 2022, as well as improving inflation expectations among economic analysts surveyed by BanRep as the reason for the more moderate rate hike, despite accelerating core inflation.
• Additionally, BanRep Governor Leonardo Villar stated that he expects the global banking crisis will have a limited effect, if any at all, on the Colombian economy.
• Given these reasons, Fitch Solutions expects that BanRep will begin to loosen policy in H223 in an effort to support growth once more evidence emerges that inflation has peaked, with the rate ending 2023 at 12.25%.
• However, risks to Fitch’s interest rate forecast are skewed more to the downside, with lower-than-expected growth posing the most significant downside risk. If economic headwinds cause Colombian GDP growth to underperform, this would not only likely cause inflation to subside faster than expected but would also pressure BanRep to cut rates in the latter half of the year in order to support economic growth.

(Source: Fitch Solutions)

• Oil prices were little changed in choppy trading on Tuesday as investors weighed OPEC+ planned production cuts against weak U.S. and Chinese economic data that could suggest cooling oil demand.
• Brent crude and WTI had jumped by more than 6% on Monday after the Organization of the Petroleum Exporting Countries and allies, including Russia, collectively known as OPEC+, rocked markets with an announcement of voluntary production cuts of 1.66 million barrels per day (bpd) from May until the end of 2023.
• U.S. job openings in February fell to the lowest level in nearly two years, and a slump in U.S. manufacturing activity in March raised concerns about oil demand. Weak manufacturing activity in China last month also added to the woes.
• Stock markets declined on the weaker economic data, while gold crossed the key $2,000 level as investors rushed to buy the safe haven asset. The economic signals ran alongside fears of an inflationary hit to the world economy, as rising oil prices fuel higher interest rates.
• OPEC+'s latest output targets bring the total volume of cuts by OPEC+ to 3.66 million bpd, including a 2 million-barrel cut last October, equal to about 3.7% of global demand.
• The production curbs led many analysts to raise their Brent oil price forecasts to around $100 per barrel by year-end. Goldman Sachs lifted its forecast for Brent to $95 a barrel by the end of 2023 and to $100 for 2024.
• Market watchers have been trying to gauge how much longer the U.S. Federal Reserve Bank may need to keep raising rates to cool inflation and whether the U.S. economy may be headed for a recession. Investors now see about a 40% chance the Fed will hike rates by a quarter basis point in May, with a roughly 60% chance of a pause.

(Source: Reuters)

• A risk-on mood fueling this year’s equities rally is likely to falter, with headwinds from bank turbulence, an oil shock, and slowing growth poised to send stocks back toward their 2022 lows, according to JPMorgan strategist Marko Kolanovic.
• “The Fed indicated no intention to cut interest rates this year, yet risk assets are exhibiting an unprecedented rally, with European stocks trading near all-time highs and US stocks recovering recent losses,” Marko Kolanovic, JPMorgan strategist, wrote in a note to clients Monday. “We expect a reversal in risk sentiment and the market retesting last year’s low over the coming months.”
• A drop in the VIX (Volatility Index) below 20, a level associated with less stressful periods, suggests investors believe the banking crisis is contained in the near term. However, Kolanovic characterizes the present market backdrop as “the calm before the storm.”
• One of Wall Streets biggest optimists through most of the market selloff last year, Kolanovic has since reversed his view, cutting his equity allocation in mid-December, January, and March due to a soft economic outlook this year.
• Stocks have remained resilient this year despite rising interest rates that have dented corporate profits, slowed growth, and triggered a series of bank collapses in the US and overseas. The benchmark S&P 500 rose 7% in the first quarter after dropping nearly 20% in 2022, while gains across technology stocks have pushed the Nasdaq 100 up 20% since the start of January and into a bull market.
• “It is worth noting the accordion-like nature of risk sentiment, where restrictive rates produced an issue for various carry trades, and the ensuing pullback in yields mitigated some of the stress,” Kolanovic wrote. “Although central banks are still communicating, there is ground to cover on fighting inflation and pushing back against the market’s assumption of cuts, so the original source of stress, rates higher for longer, can reenter the picture.”

(Source: Bloomberg)

• During the fourth quarter of 2022, the Jamaican economy grew by 3.8% relative to the fourth quarter of 2021. This resulted from growth in the Services and Goods Producing Industries of 3.6% and 4.7%, respectively, reflecting the continued recovery of the economy from the adverse effects of the COVID-19 pandemic.
• All industries within the Services Industries grew, except for the Producers of Government Services which fell by 0.8%. The top performers were Hotels & Restaurants (21.6%), Other Services (10.4%), and Transport, Storage & Communication (5.9%). The removal of COVID-19 restrictions significantly benefitted the services industries as the growth in Hotels & Restaurants was mainly influenced by a 36.5% increase in foreign national arrivals during the period.
• The increase in the Goods Producing Industries was largely due to higher output levels in Agriculture, Forestry & Fishing (5.9%), Manufacturing (5.4%), and Mining & Quarrying (99.0%). However, value added for the Construction industry declined by 4.8%. The Agriculture, Forestry & Fishing industries benefitted from favourable weather conditions while the resumption of operations at the JAMALCO plant impacted the performance of the Mining & Quarrying industry.
• Preliminary estimates from the PIOJ indicated that the Jamaican economy grew by 5.2% in the calendar year 2022. For FY2023/24 growth is projected to be between 1.0%–3.0% largely reflecting a faster-than-expected pace of recovery in the previous fiscal year leading to an earlier-than-anticipated normalisation of output and a return to the long-term trend of growth.

(Sources: STATIN & PIOJ)

• An additional US$70Mn of investment has been earmarked for the upgrading and modernisation of the Sangster International Airport (SIA) in Montego Bay, St. James. Prime Minister, the Most Hon. Andrew Holness, made the announcement after touring the ongoing runway extension and civil infrastructure project, being undertaken at the airport at a cost of US$70Mn.
• The Sangster International Airport runway extension project is slated for completion during the second quarter of 2023. The work entails extending the strip from 2,662 to 3,060 metres.
• “This is what I would call a strategic nation-building investment. This US$140Mn in total will transform the experience here. It will make Jamaica more attractive and make Jamaica more competitive with other countries in the region, which have also invested heavily in improving their infrastructure,” he said.
• Mr. Holness told journalists that the airport’s current physical infrastructure and mechanisms are “outdated”. As such, he said this “great investment” in the airport is intended to update the facilities and improve the capacity of its services for locals and foreigners.
• Approximately 70% of visitors to Jamaica come through the Sangster International Airport. That said these new and existing investments in the airport bode well for Jamaica’s tourism product as it will open up the country to other destinations, thereby increasing the prospect of more visitors and foreign earnings for the local economy.
• Mr. Holness indicated that additional investments are being made in advancing the technology platform for the immigration process where, soon, it will be a paperless system for a seamless experience, travelling through the airport.

(Source: JIS News)

• The Mexican economy could grow up to 3.0% both this year and next, boosted by increased manufacturing investment and cooling inflation, according to a copy of the government's latest budget forecasts.
• The Ministry estimates Latin America's second-biggest economy will expand between 2.2% and 3.0% this year, and between 1.6% and 3.0% in 2024, the document showed, as the country continues to claw back pandemic-led losses.
• For 2023, the "lower end of the range was adjusted upwards due to the good performance of the domestic economy," said the document containing preliminary forecasts for next year. Additionally, Mexico's inflation rate by the end of this year is seen slowing to 5.0%, and then to 4.0% by the end of 2024.
• As inflation climbed worldwide, central banks rushed to hike interest rates and slow the trend. Mexico's central bank raised rates 25 basis points to 11.25% last Thursday but hinted the hiking cycle could be nearing its end.
• Notably, Mexico is also primed to benefit from private investment fueled by "nearshoring," the trend of moving production to North America and away from Asia, the ministry said. Nearshoring could add up to 1.2 percentage points to GDP the ministry said, without specifying a time frame.
• In particular, the ministry anticipated a boost to foreign investment in manufacturing and said the automotive industry was a "natural candidate" to take advantage of nearshoring. Electric vehicle maker Tesla recently announced it would build a "gigafactory" in the northern border state of Nuevo Leon, which local officials have said could bring in up to $10Bn in investment and create 10,000 jobs.

(Source: Reuters)

• Fitch Solutions is expecting social stability in Trinidad and Tobago (T&T) to worsen in 2023, as inflation rises and crime rates surge. While T&T’s outlook on social stability is not the worst by regional standards, it will be facing headwinds in 2023.
• The government’s commitment to fiscal consolidation has led it to remove subsidies on key goods. These subsidies on food and fuel were in place since commodity and food prices spiked in early 2022.
• Consequently, inflation has risen dramatically, and if price pressures persist through 2023, ‘cost of living’ protests may become more commonplace in the country. Additionally, the government has not been successful in tapering the sharp rise in crime, seen since the end of the pandemic, which negatively affects Fitch’s ‘security’ component in its Short-Term Political Risk Index (STPRI).
• Given these reasons, Fitch Solutions have revised its STPRI score for Trinidad & Tobago from 65.0 to 64.3 out of 100.
• Despite a higher risk of protests, broad policy continuity is expected from Dr Keith Rowley’s government, as his People’s National Movement retains a comfortable majority in parliament until 2025.

(Source: Fitch Solutions)