• Fitch Solutions believes that the recent banking sector stress means that downside risks to global growth will play out through three main channels including banking sector uncertainty, tighter financial conditions, and the potential for weaker credit growth as banks focus on strengthening their balance sheets.
• First, although policymakers responded with liquidity support to Silicon Valley Bank and Signature Bank, their fall has created an untrustworthy atmosphere among regional banks. In addition, Credit Suisse came under significant stress, with credit default swaps surging to record highs as its stock price fell sharply. At the time of writing, UBS agreed to acquire Credit Suisse for $3.23Bn, and while this will help to quell short-term investor fears, this has weighed on investor confidence and could also depress US and global growth.
• Second, there has been a sharp tightening of financial conditions. Although the futures markets saw a significant dovish repricing of the path for interest rates in the US over the past week, market-based measures of financial stress increased significantly. While short-end bond yields in the US declined sharply at the same time, credit spreads across both investment grade, and high-yield bonds rose sharply, pointing to a more challenging financing environment. Moreover, this was accompanied by a sharp increase in bond volatility and a decline in equity markets, which points to increased downside volatility and weaker risk appetite over the near term.
• Third, downside risks to credit growth in the US and abroad have risen as banks focus on risk management, strengthening their balance sheet, and improving their liquidity positions. As a result, in addition to rising interest rates, there is also the potential for recent banking stress to result in credit growth slowing sharply both in the US and Europe over the coming months, which would weigh on real GDP growth.

(Source: Fitch Solutions)

• The Bank of England must decide next week whether to halt its long run of interest rate hikes or push them up again, probably for one last time, despite investor alarm over how banks in the United States and Europe are coping with higher borrowing costs.
• A 25 basis-point rise would take bank rates to 4.25%, where most economists said it would stay for at least a year. But investors have turned more doubtful about the BoE's appetite for more rate hikes in recent days amid mounting anxieties about the global banking sector. Interest rate futures on Friday showed traders were putting a roughly 50-50 chance on the BoE maintaining Bank Rate at 4% next week. A week ago, a pause was given only a 10% chance.
• Economists at Investec said the turmoil in markets had led them to change their call for the BoE's decision to no change. "To our judgment, a pause seems to be the most likely outturn, although that does not necessarily imply that tightening has finished," they said in a note to clients.

(Source: CNBC)

• Tropical Battery has recorded a year-over-year decline of 22.0% in its net profit to $44.18Mn for the first quarter of the financial year ending December 31, 2022. Revenue for the quarter was down by 1.9% to $649.44Mn and is largely attributed to the global supply chain issues and the shortage of materials. On the other hand, operating expenses for the quarter came in at $144.70Mn, 26.4% higher than last year's $114.50Mn. This increase was mainly due to higher rental/lease costs.
• TROPICAL’s stock price has decreased by 9.0% since the start of the calendar year. The stock closed Friday’s trading session at $2.01 and currently trades at a P/E of 14.2x, below the Junior Market Distribution Sector Average of 17.5x.
• Tropical Battery’s expansion of the Grove Road location is expected to be completed by December 2024. Affiliated company Diverze Properties previously acquired the neighbouring properties on which Tropical Battery is building a larger retail store with more warehouse and parking spaces.  Additionally, the company has indicated that it has taken proactive steps to increase our inventory levels to address any potential supply chain disruptions which may affect revenue generation.

(Source: JSE)

• Education received the largest share of the 2023/24 Budget for recurrent expenditure programmes outside of debt payments and compensation of employees. A sum of $142.9Bn is earmarked for the sector in the upcoming fiscal year, representing approximately 22% of the $657.2Bn for non-debt recurrent expenditure.
• This represents a $20.9Bn (17.1%) increase in the allocation when compared to the amount allocated over the 2022/23 fiscal year.
• Of this amount provided, $9.3Bn will go towards school nutrition support, which includes $7Bn for the provision of breakfast and cooked lunch for Programme of Advancement Through Health and Education (PATH) beneficiaries; $380Mn to cover the cost of school transportation to PATH beneficiaries; $15.3Bn in subvention for each of UWI and UTECH to offset operating costs; $2Bn for books and educational materials; and $1.5Bn for information and communications technology services.

(Source: JIS News)

• Trinidad and Tobago’s current account surplus is forecasted to remain high by historic standards at 12.0% of GDP in 2023, from an estimated 14.7% in 2022, as high energy prices drive goods exports.
• The surplus reflects higher than anticipated energy revenues, some spending cuts relative to the budget, and the reduction of fuel subsidies.
• Notably, higher global energy prices and prudent consolidation measures contributed to a fiscal surplus and decreased public debt in 2022.  The overall fiscal balance registered a surplus of 0.3 per cent of GDP in FY2022—for the first time in over a decade and after a record deficit of 11.7 per cent of GDP in FY2020. 
• Overall, while softening energy prices will cause the current account surplus to moderate from the multi-year highs seen in 2022, hydrocarbon production will remain robust for 2023, supporting overall export growth and goods trade surpluses in the years ahead. Additionally, a recovering tourism industry will support a slightly narrower services deficit at 7.8% of GDP in 2023, compared to 9.8% in 2022.
• With a large current account surplus expected for the coming year, T&T will continue to rebuild its international reserves. The country also continues to replenish its sovereign wealth fund, which was greatly depleted during the pandemic. This should allow the country to hedge against periods with lower hydrocarbon prices in the future.

(Source: Fitch Solutions & IMF)

• During a meeting with members of Civil Society and the media, the administrator of the Panama Canal, Ricaurte Vásquez, said that the interoceanic highway one of the country's main assets "is going through difficult times."
• The canal charges by tonnage, not by transit, and statistics are being reflected where there is more traffic of small vessels, which consequently represents less tonnage and, in turn, lower collections.
• The Panama Canal Authority reiterated that the use of the water depends on the number of transits in the Canal and that a greater volume of it is being used, at a time when the waterway is generating less income. For context, every time a ship traverses the Panama Canal, about 50 million gallons of water has to be poured into the Canal’s locks—the three-stage system that gradually raises ships for their 50-mile journey across the Panamanian isthmus. Meanwhile, there will be a decrease in the number of containers that will pass through the Panama Canal, due to economic conditions in the world.
• This comes at a time when Panama's GDP is largely linked to the global growth and activity related to the Panama Canal as the normalization of trade during the post-pandemic recovery underpinned 15.3% of the nation’s growth recorded in 2021.
• The canal usage typically filters through to the wider economy in the form of service sector expansion and infrastructure improvements. Therefore, the lower volume of passages is expected to lead to a downtick in revenue and weigh on the growth outlook for Panama.

(Source: Newsroom Panama)

• The European Central Bank on Thursday (March 16, 2023) announced a further rate hike of 50 basis points, signalling it is ready to supply liquidity to banks if needed, amid recent turmoil in the banking sector.
• The ECB had signalled for several weeks that it would be raising rates again at its March meeting, as inflation across the 20-member region remains sharply above the targeted level. In February, preliminary data showed headline inflation of 8.5%, well above the central bank’s target of 2%.
• Some market players questioned whether President Christine Lagarde would still go ahead with the move, given recent shocks in the banking sector. Credit Suisse shares tumbled by as much as 30% in Wednesday intraday trade, and the whole banking sector ended the Wednesday session down by about 7%.
• This latest move brings the bank’s main rate to 3%. It was in negative territory before July last year.
• Initial pressures on the banking sector emerged last week when U.S. authorities deemed Silicon Valley Bank insolvent. The event threw international subsidiaries of the bank into collapse and raised concerns about whether central banks are increasing rates at too aggressive of a pace. Goldman Sachs quickly adjusted its rate expectations for the Federal Reserve, due to meet next week — the bank now anticipates a 25 basis point increase after previously forecasting a 50 basis point hike.
• European officials were keen to stress that the situation in Europe is different from the one in the United States. Overall, there is less deposit concentration — SVB was an important lender to the tech and health-care sectors — deposit flows seem stable, and European banks are well capitalized since the regulatory transformation that followed the global financial crisis.
• Equity action Thursday showed some relief across the banking sector after Credit Suisse said it will borrow up to $54 billion from the Swiss National Bank, the country’s central bank.

(Source: CNBC)

• The Federal Deposit Insurance Corp deposited $40Bn back into the U.S. Treasury General Account on Tuesday, reversing a $40Bn withdrawal on Friday (March 10) as the regulator took control of the failed Silicon Valley Bank, Treasury financial data released on Wednesday showed.
• On Tuesday, before the restoration of the funds was disclosed in the latest Daily Treasury Statement, the Treasury said that the $40Bn withdrawal would not affect estimates of when it would be able to pay all U.S. government bills without a debt ceiling increase.
• After the initial $40Bn withdrawal on Friday as SVB Financial was closed and put under FDIC receivership, the Treasury, FDIC, and Federal Reserve on Sunday announced guarantees for both insured and uninsured deposits at the institution to shore up confidence in the banking system.
• The same protections were offered to New York's Signature Bank, which failed on Sunday, and the Federal Reserve opened a new facility to give the banks access to emergency funds.
• The restoration of the funds to Treasury's cash balance held at the Fed came a day after SVB and Signature reopened on Monday with access to the Fed facilities, which allow them to borrow from the Fed's discount window by pledging bonds at par value as collateral, rather than at their diminished market value.

(Source: Reuters)

• For February 2023, the All-Jamaica Consumer Price Index (CPI) increased by 0.5%. The point-to-point inflation rate for the month was 7.8 per cent, and indicates that inflation has been decelerating over the last three months.
• For February, the increase in the monthly inflation was largely driven by the 2.7% increase in the index of the ‘Housing, Water, Electricity, Gas and Other Fuels’ division. The upward movement was, however tempered by a negligible decline (-0.1%) in the heavily weighted ‘Food and Non-Alcoholic Beverages’ division as prices continued to fall within the class ‘Vegetables, tubers, plantains, cooking bananas and pulses’.
• The All-Jamaica Consumer Price Index (CPI) increased by 7.8% for the period February 2022 to February 2023. This was the smallest point-to-point increase since the period ending in December 2021. The main contributors to this upward movement were the divisions: ‘Food and Non-Alcoholic Beverages’ up by 11.3%, ‘Restaurants and Accommodation Services’ up 15.6% and ‘Housing, Water, Electricity, Gas and Other Fuels’ up by 3.7%.
• The main contributors to the Consumer Price Index (CPI) between February 2022 and February 2023 were ‘Food and Non-Alcoholic Beverages’, ‘Housing, Water, Electricity, Gas and Other Fuels’, and ‘Restaurants and Accommodation Services’. All classes within the Food division rose during the period. Further, the housing division was impacted by increased rental and ‘Electricity, Gas and Other Fuels’ costs. Increased prices for meals consumed away from home were the main cause of the increase in the ‘Restaurants and Accommodation Services’ index.
• On March 29, 2023, the BOJ will host its monetary policy meeting.  The central bank had indicated in earlier press releases that is necessary to allow the pass-through effects of previous rate hikes to take effect on deposit and loan rates. With that said, we anticipate that the bank will continue holding off on further policy rate increases at this time. Point-to-Point inflation is projected to continue falling and enter the BOJ’s target range of 4.0% to 6.0% by the December quarter.

(Source: STATIN)

• Finance Minister Dr. Nigel Clarke has indicated that the Jamaican government plans to spend more than a trillion dollars over the 2023/2024 fiscal year on the central government.
• Funds for the 2023/24 Budget are allocated across the main expenditure categories. These comprise non-debt recurrent expenditure of $657.2Bn, capital expenditure of $74.4Bn, and debt servicing of $280.6Bn. Central Government revenue and grant inflows are estimated at $897.6Bn.
• When compared to the proposed allocation for the 2022/2023 fiscal year, government expenditures for non-debt recurrent expenditure and capital expenditure have increased by $52.7Bn (+8.7%) and $10.3Bn (+14.3%), respectively. However, expenditure for debt servicing decreased by $26.9Bn (- 8.7%) given the fall in the country’s stock of debt.
• This will generate the required fiscal balance surplus of $9.9Bn or 0.3% of gross domestic product (GDP), consistent with fiscal rules.
• The corresponding primary balance required for debt service and to generate the targeted fiscal balance is approximately $165Bn or 5.6% of GDP.
• Further, the overall public debt is estimated to end the current fiscal year on March 31 at 79.7% of GDP and is expected to decline further to 74.3% of GDP by fiscal year 2023/24. Should this (projection) be achieved, it would mark the first time since the nationalisation of the financial sector crisis through FINSAC in the latter half of the 1990s that debt has entered the domain of pre-FINSAC levels.

(Source: JIS News)