• The Barbados Labour Party (BLP), led by Prime Minister Mia Mottley, will maintain high expenditure levels in the short term to ensure social stability while the tourist industry, which contributes around 40.0% of GDP, continues to recover from the effects of the pandemic.
• As stimulus measures from the pandemic era are still in place with the ongoing economic recovery, spending is expected to remain high in 2022 at 35.1% of GDP, higher than the 31.3% observed during FY2015/16 - FY2019/20. Notably, the most recent budget still includes the stimulus payments from the COVID era to improve household earnings in Barbados and raise pension contributions for public sector employees. Additionally, as the government continues to finance research into renewable energy sources, capital expenditures will also continue to rise.
• In the near future, Fitch anticipates that the government of Barbados will be able to finance increased expenditure initiatives thanks to the Extended Fund Facility (EFF) agreement with the IMF. The four-year, USD290.0Mn deal was approved in 2018 and revised following the pandemic and Hurricane Elsa, which made landfall in July 2021, lowering the primary balance target from 6.0% of GDP to -1.0% currently. This will allow the government to keep countercyclical spending initiatives in place for longer, maintaining social stability even as multiple variants have delayed the rebound of the tourism sector.
• However, amidst the Russia-Ukraine conflict, which has driven up global energy prices, the government has opted not to implement substantial fuel subsidies, though it has capped the value-added tax on fuel. This has resulted in isolated demonstrations as Barbadians feel the direct impact of higher fuel costs. Further, as global growth slows, there is an increasing risk that demand for international travel in Barbados’ key source markets, the US, UK and Canada, will wane, slowing the country’s rebound. This would likely increase unemployment and the risk of social unrest, particularly if the government also removes income support measures.

(Source: Fitch Solutions)

• The first ship carrying Ukrainian grain set out Monday, August 1^st, from the port of Odesa under an internationally brokered deal to unblock the embattled country’s agricultural exports and ease the growing global food crisis. The Sierra Leone-flagged cargo ship Razoni sounded its horn as it slowly departed with over 26,000 tons of corn destined for Lebanon.
• Russia and Ukraine signed agreements in Istanbul with Turkey and the U.N. on July 22, clearing the way for Ukraine to export 22 million tons of grain and other agricultural products that have been stuck in Black Sea ports because of Russia’s invasion of Ukraine more than five months ago. The deals also allow Russia to export grain and fertilizer.
• Kubrakov said the shipments will also help Ukraine’s war-shattered economy. “Unlocking ports will provide at least $1Bn in foreign exchange revenue to the economy and an opportunity for the agricultural sector to plan for next year,” he said.
• Under the agreements, ships going in and out of Ukrainian ports will be subject to inspection to make sure that incoming vessels are not carrying weapons and that outgoing ones are bearing only grain, fertilizer or related food items, not any other commodities.
• More ships are expected to leave from Ukraine’s ports through the safe corridors. At Odesa, 16 more vessels, all blocked since Russia’s invasion on Feb. 24, were waiting their turn, with others to follow, Ukrainian authorities said. However, some shipping companies are not yet rushing to export food across the Black Sea as they assess the danger of mines and the risk of Russian rockets hitting grain warehouses and ports.

(Source: AP news)

• European gas futures jumped roughly 6% Monday, August 1, 2022 after Russia's Gazprom announced it had shut off natural gas flows to Latvia, per the Wall Street Journal. The state-run energy major said the gas was shut off to the EU nation because of a "violation of the conditions for gas withdrawal."
• Since Russia invaded Ukraine, Moscow has halted natural gas flows to companies in Poland, Bulgaria, the Netherlands, and Denmark, while severely reducing flows to Germany via the Nord Stream 1 pipeline.
• Latvia, historically, has been fully dependent on Russian gas, but had said it would find alternative energy sources by the start of next year.
• Russia is the largest energy supplier for Europe, and accounts for roughly 40% of the continent's natural gas. European officials have accused President Vladimir Putin of wielding energy as a political weapon, and Moscow is widely seen as cutting gas off in retaliation for sanctions. Other EU nations have been trying to reduce demand as they prepare for a potential full cut-off of supplies from Russia.

 (Source: Insider)

• For June 2022, output prices for producers in the Mining & Quarrying industry increased by 0.3% and 2.9% in the Manufacturing industry.
• The upward movement in the index for the Mining & Quarrying industry was mainly attributed to a 0.2% rise in the index for the major group ‘Bauxite Mining & Alumina Processing’. The index for the other major group, ‘Other Mining & Quarrying’, moved upward by 2.3%.
• The main contributors to the increase in the index for the Manufacturing industry were the major groups: ‘Food, Beverages & Tobacco’ up by 2.9%, ‘Refined Petroleum Products’ up by 4.6% and ‘Other Non-Metallic Mineral Products’ up by 8.8%.
• The monthly rise resulted in an overall point-to-point (June 2021 – June 2022) rise of 22.4% and 23.8% for the Mining & Quarrying and Manufacturing industries, respectively.
• The rise in the producer price index continues to be supported by the elevated energy and shipping costs, as well as supply chain challenges stemming from geopolitical conflicts and the residual effects of the pandemic. These increases have caused some businesses to be less confident about economic prospects as shown in the recent 7.6% decline in the business confidence index.

(Sources: STATIN & NCBCM Research)

• Guyana and the United States Export-Import Bank (EximBank) on July 27^th signed a Memorandum of Understanding (MoU) to finance projects in Guyana – outside of oil and gas – for up to an initial US$2Bn.
• The MoU represents an important milestone in US-Guyana relations since it lays the foundation for Guyana to access EXIM financing and facilities for the first time and provides for interventions at a scale that is likely to have a lasting developmental impact.
• The MoU also identifies a number of indicative sectors in which projects may be identified. These include but are not limited to: infrastructure (including roads and bridges); energy (including renewable energy and emission reduction); telecommunications (including wireless technologies); water treatment and sanitation (including technologies and infrastructure); and agriculture.
• President Irfaan Ali said the move was “dynamic, bold and futuristic in advancing the cause of both countries.” The areas identified show the broad and multifaceted nature of the leadership at the bank, as most investors narrowly focus on Guyana’s oil and gas opportunities.
• The signing of the MoU is seen as a demonstration of the commitment to remove inhibiting factors that have long affected easy access to financing by countries across the Caribbean region, including Guyana.

(Source: Newsroom)

• Barbados’ economy has grown for the fifth consecutive quarter, but the current extremely challenging global economic environment has prompted the Central Bank to slightly lower its growth forecast for the rest of the year.
• The economy grew 10.5% for the first half of 2022. Though vibrant, the expansion was weaker than in the first quarter (11.8%). The recovery is mainly reflective of the rebound in tourism activity and there were also modest gains in manufacturing exports and domestic spending.
• The economist noted that while tourism-related activity had not yet returned to pre-pandemic levels, "the easing of the protocols opened the way for increased domestic spending and enabled the labour market to show signs of a return to near normality".
• The downside, however, was that "inflationary pressures originating abroad were felt in the domestic market, raising the risk of a dampening of growth prospects". Additionally, with new investment projects coming on stream at a slower pace than anticipated and with construction costs rising, the bank has lowered its growth forecast slightly, within the range of 9 to 10%, with the possibility of a stronger outturn if tourism is more favourable than currently forecast.

(Source: Nation News)

• The latest read on inflation is undermining the Fed’s most recent dovish tone and has showed that the Fed may have even more work to do. An inflation gauge that the Federal Reserve uses as its primary barometer jumped to its highest 12-month gain in more than 40 years in June, the Bureau of Economic Analysis (BEA) reported on July 29.
• The personal consumption expenditures price index rose 6.8%, the biggest 12-month move since the 6.9% increase in January 1982. The index rose 1% from May, tying its biggest monthly gain since February 1981.
• Excluding food and energy, so-called core PCE increased 4.8% from a year ago, up one-tenth of a percentage point from May but off the recent high of 5.3% hit in February. On a monthly basis, core was up 0.6%, its biggest monthly gain since April 2021.
• Both core readings were 0.1 percentage point above the Dow Jones estimates. Fed officials generally focus on core inflation, but have turned their attention recently to the headline numbers as well, as food and fuel prices have soared in 2022.
• The BEA release also showed that personal consumption expenditures, a gauge of consumer spending, increased 1.1% for the month, above the 0.9% estimate and owing largely to the surge in prices. Real spending adjusted for inflation increased just 0.1% as consumers barely kept up with inflation. Personal income rose 0.6%, topping the 0.5% estimate, but disposable income adjusted for inflation fell 0.3%.
• Earlier this month, data showed the consumer price index rose 9.1% from a year ago, the biggest gain since November 1981. The Fed prefers PCE over CPI as a broader measure of inflation pressures. CPI indicates the change in the out-of-pocket expenditures of urban households, while the PCE index measures the price change in goods and services consumed by all households, as well as nonprofit institutions serving households.

(Source: CNBC)

• U.S. labour costs increased strongly in the second quarter as a tight jobs market continued to boost wage growth, which could keep inflation elevated and give the Federal Reserve cover to continue its aggressive interest rate hikes.
• Other data on Friday showed consumer spending accelerating in June, though the uptick was tied to higher costs for gasoline as well as a range of other goods and services, with monthly prices surging by the most since 2005. Soaring inflation contributed to the economy's contraction in the first half of this year, leaving it on the brink of a recession.
• "The Fed will continue to grapple with trying to tame inflation without tipping the economy into a recession," said Dante DeAntonio, an economist at Moody's Analytics in West Chester, Pennsylvania "The data on wage and price growth will not do them any favours as upward pressure clearly remains even as the overall economy has weakened."
• The Employment Cost Index, the broadest measure of labour costs, increased 1.3% last quarter after accelerating 1.4% in the January-March period.
• Economists polled by Reuters had forecast the ECI would rise 1.2% in the second quarter. Labour costs surged 5.1% on a year-on-year basis, the largest rise since the current series started in 2001, after increasing 4.5% in the first quarter.
• The ECI is widely viewed by policymakers and economists as one of the better measures of labour market slack and a predictor of core inflation, as it adjusts for composition and job-quality changes. It is being closely watched for signs of whether wage growth has peaked as economists and investors try to gauge the pace of the Fed's interest rate hikes.

(Source: Reuters)

• The recent cruise industry recruitment exercise held on June 23rd, has, so far, resulted in the employment of 3,609 Jamaicans.
• The process is still ongoing by the Royal Caribbean Cruise Lines, and it is anticipated that over 5,000 Jamaicans will be employed at the end of it. Additionally, another recruitment drive will be held later in the year to meet the target of employing approximately 10,000 Jamaican workers.
• This recruitment drive came at an opportune time, when the cruise sector and tourism by extension are showing signs of growth and is a telling indicator that Jamaican workers are viewed positively on the global stage.
• This is expected to contribute to a further decline in the unemployment rate which fell to a new record low of 6% in April 2022, and will further drive consumption and by extension, economic growth.

(Source: JIS News)

• The House of Representatives, on July 26, approved the Electricity (Net Billing) Regulations 2022, which are intended to provide opportunities for fuel diversification, development, and deployment of renewable energy sources.
• The policy establishes the framework for the transformation of Jamaica’s energy sector from an overdependence on petroleum and high customer prices. “This steady progression has seen the movement of the target for renewable energy shifting from 20% to the current 50%, in order to reduce our dependence on fossil fuel,” said the Minister of Science, Energy and Technology.
• Minister Vaz noted that consultations were held to develop the regulations, noting that they are intended to provide the legal framework for the generation of electricity by self-generators.
• The aim is to provide the parameters to ensure that the grid is not negatively affected by net billing arrangements; to enable the structured alignment with the integrated resource plan for distributed energy resources on the grid; facilitate energy sector investment, while ensuring transparency, safety, affordability, accessibility, sustainability, continuity, reliability and consumer protection.
• This should increase the contribution of distributed renewable energy in the energy supply mix, while allowing wide scale participation in the energy sector.

(Source: JIS News)