• Fitch Solutions expects that Trinidad and Tobago's (T&T) budget deficit will shrink slightly from 1.1% of GDP in FY22 to 0.9% in FY23. This is a major reversal of trends observed in pre-COVID years when T&T ran an average deficit of 4.3% (FY15-FY19).
• Persistent strength in hydrocarbon exports will help to drive the reduction in the budget deficit, via stronger revenue growth. T&T benefitted immensely throughout 2022 from hydrocarbon revenue owing to higher energy prices. Although T&T does not provide an exact breakdown, in USD terms, about a quarter of hydrocarbon production revenue currently comes from oil with the rest coming from natural gas.
• According to Fitch’s Oil & Gas team, growth in hydrocarbon production in the barrel of oil equivalent (boe) terms will ease from 8.8% y-o-y in 2022 to 4.2% y-o-y in 2023, but still well above pre-Covid production levels. Meanwhile, hydrocarbon exports are expected to remain strong in 2023, and Fitch forecasts that T&T export volumes will come in at about 314,000 in boe terms, compared to 286,000 in 2022, a 10.0% increase.
• That being said, expenditure growth will remain moderate in T&T as policymakers continue to signal their commitment to fiscal consolidation. Fitch forecasts that government spending as a share of GDP will drop back from an estimated 27.2% of GDP in FY22 to 26.9% in FY23, as T&T’s government continues to avoid pursuing significant spending increases despite the revenue windfall.
• The combination of still robust nominal output growth and a smaller expected deficit should see the government debt-to-GDP ratio decline from 72.3% in 2022 to 71.3% this year and is likely to remain manageable in the years ahead as the government continues with its cautious approach to fiscal policy.

(Source: Fitch Solutions)

• Outstanding loans in Brazil decreased by 0.3% in January, according to the Central Bank, marking the first decline in a year. The result suggests a slowdown that is likely to gain momentum in a scenario of high borrowing costs following the aggressive monetary tightening implemented by the central bank to curb inflation.
• Outstanding loans fell to 5.3 trillion reais ($1 trillion) in January, with loans to companies decreasing by 2.4%, while credit to families rose by 1.1%. Over the past 12 months, total credit expansion was 13.6%, down from 14.0% in the previous month.
• Fernando Rocha, head of the central bank Statistics Department, said that credit retraction to companies followed a seasonal behaviour, although the drop was "slightly greater" this time from the same month in 2022. After Brazilian retailer Americanas SA entered into bankruptcy protection in Brazil, Rocha stated that it is too soon to say whether the case has impacted the credit market.
• Bank loans in Latin America's largest economy have decelerated amid more expensive credit, as the country's benchmark interest rate stands at 13.75% from a record low of 2% in March 2021. This has prompted constant criticism from the new leftist President Luiz Inacio Lula da Silva and his political allies, who see the level of interest rates as unjustifiable given slowing inflation, which reached 5.63% in Mid-February.
• The central bank has left interest rates unchanged since September, but data from the central bank shows that average interest rates on non-earmarked loans have increased to 43.5% per year from 41.7% in December.
• Bank lending spreads also grew from 28.7 points the month before to 30.6 percentage points, while a broad measure of Brazilian consumer and business default ratios increased to 4.5% from 4.2% in December.

(Source: Reuters)

• Britain's economy, which had seemed certain to fall into recession in early 2023, has shown some unexpected signs of recovery, raising questions about whether the Bank of England really is about to pause its run of interest rate increases.
• The British central bank signalled on Feb. 2 it was getting close to slowing or pausing its run of interest rate increases after some measures of inflation pressure eased and the economy looked set to go into recession.
• Since then, however, the improvement in the economic data has prompted investors to increase their bets on the Bank Rate, which currently stands at 4.0%, rising to 4.25% next month and 4.5% in May, with a one in three chance of hitting 5% in August.
• Bounces in measures of business activity and consumer confidence and a pickup in tax revenues have led some analysts to upgrade their forecasts for the economy this year, although any growth is likely to be weak. JP Morgan last week raised its projection for gross domestic output growth in 2023 to 0.4% from a previous estimate of 0.1%. That compares with the Bank of England's (BoE) forecast, made in early February, for a contraction of 0.5%.
• Despite the improvement signs, Britain is the only Group of Seven (G7) economy still smaller than before the coronavirus pandemic. Economists say that reflects the pandemic's big impact on the country and the problems relating to Brexit.

(Source: Reuters)

• The European Union agreed Saturday to impose new sanctions on Russia over its invasion of Ukraine targeting more officials and organizations accused of supporting the war, spreading propaganda, or supplying drones, as well as restricting trade on products that could be used by the armed forces.
• Asset freezes were slapped on three more Russian banks and seven Iranian “entities” — companies, agencies, political parties, or other organizations — that manufacture military drones, which the EU suspects have been used by Russia during the war.
• Russia’s energy sector was hit, too — notably oil and coal — and the bloc, through its own measures and political decisions combined with retaliation from Moscow, was rapidly weaned off its dependence on Russian natural gas.
• Ukrainian President Volodymyr Zelenskyy welcomed the new package in his nightly address on Saturday. “Sanctions will continue to be introduced so that nothing remains of the potential of Russian aggression,” he said.
• The sanctions are meant to undermine Russia’s economy and drain funds for its war effort, but they are also increasingly inflicting pain on European economies already hit by high inflation and energy prices and still suffering from the effects of the COVID-19 pandemic.

(Source: AP News)

• Developing human resource capacity through education and training, is one way in which Jamaica is building resilience in tourism, says Minister without Portfolio in the Office of the Prime Minister, Hon. Floyd Green.
• The Minister, who was participating in a panel discussion as part of the inaugural Global Tourism Resilience Conference, cited the work being done by the HEART NSTA Trust, in equipping persons in various skills areas to serve the sector. He said that the Ministry of Tourism recognised “very early” the importance of building human resource skills in the sector and has been providing training and certification at various levels including in the communities.
• “We started the Jamaica Centre of Tourism Innovation (JCTI) to focus a lot on the workforce that we already have and ensuring that they have the certification because a lot of them already have the experience,” he noted.
• The JCTI programme is also being implemented in various high schools across the island. Minister Green noted that while community tourism evolves organically, those involved in this aspect of the sector still require training and certification to build capacity.
• Although the tourism industry has been recovering strongly from the COVID-19 pandemic, it has been faced with a shortage of trained workers.  As such the tourism ministry is seeking to resolve the talent issue with the creation of various training programmes to fill current and anticipated training gaps in the industry.

(Source: JIS)

• SCI has advised that a decision was made on February 10, 2023, by the Board of Directors to pursue the de-listing of its cross-listed ordinary JMD and USD shares on the Jamaica Stock Exchange (JSE).
• The Shares of SCI were listed on the Main Jamaican Dollar Market (JMD Market) and the US Dollar Market (USD Market) of the JSE on June 18, 2018. At the time of listing the Shares were also cross-listed on both markets, and as such, the JMD Shares could be traded on the USD Market and the USD shares could be traded on the JMD Market.
• Trading across markets is extremely low in volume when compared to trading on the Main Market for the JMD and USD Ordinary Shares of SCI, as a result, the decision was taken to delist the cross-listed shares.

(Source: JSE)

• Mexico's inflation is forecast to have eased in the first half of February, a Reuters poll showed on Monday, though consumer prices remain well above the central bank's target of 3%, and are likely to make way for another interest rate hike.
• The median forecast of 13 analysts forecast annual headline inflation of 7.80% in the first half of February, below the 7.88% recorded in the second half of January.
• Annual core inflation, which strips out volatile food and energy products, is expected to have dipped to 8.42%, down from 8.46% in the previous fortnight, and sinking from its peak of 8.66% in the first half of November last year. 
• Banxico, as the Mexican central bank is known, has raised its key interest rate by 700 basis points since its rate-hiking cycle started in June 2021. Earlier this month it raised the rate by a larger-than-expected 50 basis points to 11%, as inflation remains far above its target of 3%, plus or minus 1 percentage point
• It is important to note that smaller future hikes are expected. Banxico’s deputy bank governor, Jonathan Heath, told Reuters last week that the bank's monetary tightening cycle is nearing its end and nominal interest rates could top out at between 11.25% and 11.75%, at which point rates would be kept steady to allow them to take effect.

(Source: Reuters)

• Pointing to potential risks of the Sand Dollar, the International Monetary Fund (IMF) said in a new working paper that the central bank digital currency (CBDC) could pose risks to financial intermediation, integrity, and cybersecurity despite its limited use to date.
• The working paper, entitled “Crypto Assets and CBDCs in Latin America and the Caribbean: Opportunities and Risks”, notes that while the Central Bank of The Bahamas’ (CBOB) architecture has some features to mitigate risks, there are still challenges.
• “The CBDC could substitute for deposits in commercial banks, with implications for bank funding, profitability, and financial intermediation. Moreover, a digital currency involves costly investments in new technologies, infrastructure, and external expertise. It can also expose a central bank to new risks and introduce new challenges for ensuring financial integrity, while cyberattacks or technological glitches can impact the central bank’s reputation,” the paper states.
• However, depending on the deposit structure, banks could be subject to disintermediation, bank runs, and deposits could quickly move from a financial institutions to the CBDC and as such, mitigation strategies are warranted. “To limit disintermediation risks and substitutability with bank deposits, Sand Dollar holdings do not earn interest, and a ceiling is in place limiting the amount users can hold in their wallets. Moreover, level 2 and 3 wallets are linked to accounts at financial institutions. To mitigate potential runs in case of stress, a circuit breaker has been embedded in the system to prevent massive flows,” the IMF paper stated.
• The Bahamas was the first country in the world to launch a CBDC, the Sand Dollar, in October 2020. The benefits of a digital currency were mostly linked to overcoming financial exclusion. However, the dollar remains less than 0.1 per cent of the currency in circulation and of broad money in The Bahamas.

(Source: The Nassau Guardian)

• The U.S. economy expanded at a 2.7% annual rate from October through December, a solid showing despite rising interest rates and elevated inflation, the government said Thursday in a downgrade from its initial estimate. The government had previously estimated that the economy grew at a 2.9% annual rate last quarter.
• The Commerce Department’s revised estimate of last quarter’s gross domestic product — the economy’s total output of goods and services — marked a deceleration from the 3.2% growth rate from July through September.
• More recent data issued this month, though, shows that the economy has since rebounded. Consumers boosted retail sales in January by the most in nearly two years, and employers added a surprisingly outsize number of jobs. The unemployment rate reached 3.4%, the lowest level since 1969.
• Inflation, measured year over year, has cooled since it reached 9.1% in June, having slowed to 6.4% in January. Yet on a monthly basis, price gains accelerated from December to January, raising the prospect that the Fed will raise its benchmark rate higher than it has previously signalled.
• Higher borrowing costs make mortgages, auto loans and credit card borrowing more expensive. Those higher rates could discourage consumers and businesses from spending, hiring and investing and could eventually push the economy into a recession.

(Source: AP News)

• British retail sales held steady in February after falling in January but stores expect sales volumes to slip again in March as the rising cost of living eats away at disposable incomes.
• The Confederation of British Industry's (CBI) distributive trades index rose to +2 this month from -23 in January. A Reuters poll of economists had pointed to a reading of -13. But a measure of expected sales in the month ahead fell to -18 from -15. Official data published last week showed shoppers spent more than expected in January but inflation-hit households were buying fewer items and relying more on discounts.
• Gabriella Dickens, an economist at Pantheon Macroeconomics, said the recovery in the CBI's sales measure this month would "likely prove a false dawn" as households are expected to spend less in the coming months as the risk of a recession looms.
• Its average selling price balance fell two percentage points to a still historically high +80 in the three months to February from +82 in the three months to the end of November. The Bank of England has signalled that it believes the tide is turning on Britain's inflation.
• Consumer price inflation eased to 10.1% last month after hitting a 41-year high of 11.1% in October. Economists polled by Reuters this month expect inflation to average 7.0% this year, and 2.6% in 2024.

(Source: Reuters)