• The Biden administration has granted a license to Trinidad and Tobago to develop a major gas field located in Venezuelan territorial waters, U.S. and Trinidad's officials said on Tuesday, marking a further easing of some sanctions on Venezuela.
• The license, issued by the U.S. Treasury Department at Trinidad's request and intended to enhance Caribbean regional energy security, means the island nation can do business related to the Dragon gas field with Venezuela's heavily sanctioned state-run oil company PDVSA.
• Prime Minister Keith Rowley, speaking at a news conference in Port of Spain, said Trinidad expects to gain access to 350Mn cubic feet of gas per day from the Dragon field.
• He said he applied for the license in mid-2022 and won approval after discussing it with top U.S. officials, including U.S. President Joe Biden, while also keeping open a channel of communication with Venezuelan President Nicolas Maduro.
• This new development will help bolster the country's revenues by increasing its LNG production.

(Source: Reuters)

• The Bank of Canada on Wednesday hiked its key interest rate to 4.5%, the highest level in 15 years, and became the first major central bank fighting global inflation to say it would likely hold off on further increases for now. The 25-basis-point rise matched analysts' expectations. The bank has lifted rates at a record pace of 425 basis points in 10 months to tame inflation, which peaked at 8.1% and slowed to 6.3% in December, still more than three times the 2% target. 
• "We are turning the corner on inflation," Bank of Canada Governor Tiff Macklem told reporters. "We are still a long way from our target, but recent developments have reinforced our confidence that inflation is coming down."
• Macklem said the bank wanted to take time to see how effective the rapid hikes had been in dampening excess demand and hot labour markets that have fueled inflation. "To be clear, this is a conditional pause," he said, noting there were upside risks to the outlook.
• In its quarterly Monetary Policy Report (MPR), which includes new forecasts, the bank painted a picture of an economy that is going to stall and could tip into a recession during the first half of the year, bringing inflation down to about 3% at mid-year and back to 2% in 2024. The Canadian dollar was trading 0.3% lower at 1.3410 per greenback, or 74.57 U.S. cents. The 2-year yield eased nearly 6 basis points to 3.596%.

(Source: Reuters)

• A full-blown debt ceiling crisis has the potential to stop the US economy in its tracks, according to the top economist at Goldman Sachs. “If there were any doubt about the US government’s ability or willingness to make interest and principal payments on time, that could have very, very adverse consequences,” Jan Hatzius, the chief economist at Goldman Sachs, told CNN in an interview.
• The United States hit the debt ceiling last week, forcing Treasury Secretary Janet Yellen to make accounting manoeuvres to avoid breaching that $31 trillion borrowing limit. Economists and US officials have previously warned of dire consequences if the federal government exhausts the extraordinary measures used to avoid a default.
• If Congress fails to lift the debt ceiling in time, Hatzius said investors will worry there is a chance of a missed payment on US Treasuries – which are “maybe the most important asset in the global economy.” Unlike many of its peers on Wall Street, Goldman Sachs is relatively bullish on the US economy, with Hatzius telling CNN that America will likely avoid a recession through the 2024 presidential election. However, a debt ceiling crisis is a key risk to that optimistic outlook.
• Assuming the United States gets through the debt ceiling episode, Goldman Sachs is optimistic about the prospects for the US economy. “We don’t expect a recession,” Hatzius said, noting his firm sees a still-significant 35% chance of a recession, compared with the consensus on Wall Street of roughly 65%. “Our baseline is a soft landing.”
• Goldman Sachs expects the labour market will continue to cool down, but only gradually. That deceleration, combined with the housing slowdown, unwinding of supply chain turmoil and impact from the war in Ukraine, should help bring down inflation without causing a downturn.

(Source: CNN

• Caribbean Cream Limited (Kremi) Limited recorded a net profit of $2.4Mn for the third quarter that ended November 30, 2022. This represents a turnaround in profitability relative to the $25.15Mn loss of the corresponding period of 2021. However, the company’s bottom line for the nine months declined by 69.9% to $10.93Mn when compared to the same period in 2021, given a 96.6% growth in finance costs. This is likely a result of the acquisition of the cone manufacturing company, Koni Kone, for $45Mn in 2021.
• Gross operating revenue for the quarter was up by 15% Y-o-Y to $575.59Mn, while the nine-month revenue was $1.83Bn and represents a 19.4% jump. The increase in the Y-o-Y cost of goods sold; however, outweighed the growth in revenues resulting in a falloff in gross profit margin from 32% to 29% for the nine months.
• Administrative, selling and distribution expenses were 11.7% higher in the nine months ending November 2022 compared to the $425.00Mn recorded in the same period of last year. This was largely due to higher costs associated with utilities, security and repairs, and maintenance.
• Kremi’s stock price has decreased by 1.6% since the start of the calendar year. The stock closed Wednesday’s trading session at $3.80 and currently trades at a P/B of 1.78x, below the Junior Market Manufacturing Sector Average of 3.08x.
• The outlook for Kremi is positive as it continues to invest in its capital base with work on its CHP plant which will see the company becoming self-sufficient in energy. Moreover, the construction of its new cold room and blast room will increase its capacity to store frozen novelties and reduce bottlenecks in the production flow.

(Sources: JSE and NCBCM Research)

• Fitch expects that the Dominican Republic will see real GDP growth ease from an estimated 5.0% in 2022 to 4.2% in 2023. Consequently, the agency revised its 2022 estimate from 4.6% previously, as Q3 GDP data showed accelerating private consumption (4.8% y-o-y) and investment (6.5%) growth, despite headwinds posed by elevated inflation and interest rates.
• This underpinned 5.0% headline growth in the quarter and 5.4% in the year through Q322. Moreover, the economic activity index showed growth remained strong, slowing only slightly in Q4 2022.
• For 2023, Fitch maintained its forecast for 4.2% growth, as slowing growth in the US will pose several headwinds for DR’s economy. The country is also expected to underperform its 2015-2019 average growth rate of 6.1% for the second consecutive year.
• Fixed investment will remain largely stable at a 1.5pp contribution to headline growth in 2023, from 1.6pp in 2022. Banco Central de la República Dominicana (BCRD) will keep interest rates high at 8.50% through H1 2023, and only modestly lower rates to 6.75% by end-2023, despite Fitch’s expectation that rates will remain in restrictive territory.
• Stickier-than-expected inflation and the threat of natural disasters continue to pose downside risks to the growth forecast. While headline inflation moderated from a peak of 9.6% y-o-y in April to 7.8% by end-2022, it is still far above the BCRD’s target of 4.0%. If food or fuel prices prove stickier than Fitch’s current forecast of 6.5% average inflation in 2023 due to supply shocks from the Russia-Ukraine conflict or demand-side shock from China, it could drive a further reduction in private consumption in 2023, depressing headline growth.

(Source: Fitch Solutions)

• Panamanian real GDP growth is expected to slow to 4.2% in 2023 after an estimated 7.0% expansion in 2022. While growth will hold up in the country in the early part of the year due to strong demand for canal-related services and a booming construction sector, these tailwinds will begin to fade later this year as global economic activity continues to cool. Growth will also be lower in 2023 due to less favourable base effects, a weakening outlook for the tourism sector, and possible disruptions in the copper industry.
• Private consumption’s contribution to overall GDP is anticipated to be 2.3 percentage points (pp) in 2023, down from 3.8pp in 2022. Still, it is expected that private consumption will remain upbeat as Panama is a dollarized economy, which, combined with government subsidies on vital goods, has helped inflation remain low relative to other economies in the region.
• Importantly, according to the World Tourism Council, arrivals to Panama fell in Q3 2022 compared to the same period in 2019, the first quarterly decrease since the start of the pandemic. However, Fitch still expects services related to the Panama Canal to remain robust. 
• Risks to growth are weighted to the downside. Panama’s dispute with First Quantum Minerals is bound to impact exports, but if the dispute is not resolved soon, production and exports will be severely hampered for a much longer period.
• Additionally, the Agency remains concerned that a downturn in the US and other key tourism markets that is more severe than currently forecasted will adversely affect growth in H2 2023, lowering service exports further and also weighing on employment and private consumption.

(Source: Fitch Solutions)

• U.S. Treasury Secretary Janet Yellen activated another extraordinary cash management measure on Tuesday to avoid breaching the federal debt limit, suspending daily reinvestments in a large government retirement fund that holds Treasury debt, the department said.
• In a letter notifying Congress of the move to access the Government Securities Investment Fund (G Fund), Yellen did not alter a projected early June deadline for when the Treasury may no longer be able to pay the nation's bills without an increase in the $31.4 trillion statutory borrowing limit.
• The G-Fund manoeuvre is one of the largest tools the Treasury can employ to reclaim borrowing capacity under the debt ceiling. Yellen last week suspended reinvestments in two other retirement and health benefit funds as the government nominally reached the debt ceiling.
• Normally the money market-like retirement fund reinvests its entire balance daily into special-issue Treasury securities that count against the debt limit. Halting the reinvestments allows more normal Treasury bills, notes, and bonds to be issued.
• But the Treasury is required by law to replenish the fund and any lost earnings once a debt limit impasse ends. Federal retirees and employees would be unaffected by this action. "I respectfully urge Congress to act promptly to protect the full faith and credit of the United States," Yellen wrote, repeating a regular line in her letters to lawmakers.

(Source: Reuters)

• The Bank of Canada on Wednesday hiked its key interest rate to 4.5%, the highest level in 15 years, and became the first major central bank fighting global inflation to say it would likely hold off on further increases for now.
• The 25-basis-point rise matched analysts' expectations. The bank has lifted rates at a record pace of 425 basis points in 10 months to tame inflation, which peaked at 8.1% and slowed to 6.3% in December, still more than three times the 2% target.
• "We are turning the corner on inflation," Bank of Canada Governor Tiff Macklem told reporters. "We are still a long way from our target, but recent developments have reinforced our confidence that inflation is coming down."
• Canada's approach has until now matched that of the U.S. Federal Reserve, which ratcheted up its own target policy rate by 4.25 percentage points over the last year. The Fed is set to slow the pace of its hikes at a Jan. 31-Feb. 1 policy meeting and signal its battle against inflation is far from over.

(Source: Reuters)

• Knutsford Express Services Limited (KEX) Limited recorded a net profit of $58.8Mn for the second quarter that ended November 30, 2022. This represents a 2665.9% increase in profitability when compared to the $2.1Mn recorded over a similar period in 2021.
• This added to the positive Q1 results influencing a 965.5% increase in the bottom line for the first six months.
• Revenue for the quarter was up by 65.4% yoy to $398Mn. Similarly, the YTD showed a 71.8% increase in revenues for the company. This was driven by increased local and international travel, and its courier services. Additionally, one of its key initiatives, The Knutsford Centre in Drax Hall is now creating rental income to supplement its core business.
• Despite a 38.3% increase in administrative expenses for H1 - owing to the strong revenues - operating profit skyrocketed to $187.57Mn from $20.87Mn, representing a 798.6% increase.
• KEX’s stock price has increased by 40.5% since the start of the calendar year. The stock closed Monday’s trading session at $12.49 and currently trades at a P/E of 25.5x which is above the Junior Market Other Sector Average of 21.6x.
• Given further improvements in tourism that are expected this year, we expect that the company should continue experiencing improved top and bottom-line growth in the coming quarters. However, one risk to the outlook is the possibility of a global recession that could depress travel and weigh on the company’s performance in the near term.

(Sources: JSE and NCBCM Research)

• Inflation in Peru will likely end January at a rate between 8.8% and 8.9% on an annual basis, the country's minister of economy said on Monday, as protests and road blockades push up food prices.
• However, he expects the impact to be temporary due to economic stimulus measures the government is proposing for regions roiled by protests.
• Peru has been embroiled in political turmoil since December, with anti-government protests blocking roads and clashes with security forces leading to the death of dozens of people. In December, Peru registered monthly inflation at 0.79%, ending the year at 8.46%, the highest annual measurement in the last 26 years.
• Despite the high rate in January, the country's central bank expects a decreasing trend in year-on-year inflation in March, and a return to the inflation target range of between 1% and 3% by the end of 2023.

(Source: Reuters)