• The Jamaican economy continued to show signs of recovery from the impact of the COVID-19 pandemic and grew by 6.7% during Q4 2021 when compared to Q4 2020. 
• This was due to increases in both the Services Industries (+9.0%) and the Goods Producing Industries (0.5%). The expansion of the economy was positively impacted by the relaxation of some COVID-19 measures, including the easing of global travel restrictions and reduced curfews hours. 
• There was growth in all the Services Industries, except the Producers of Government Services, which declined by 0.1%. Improved performances were recorded for: Hotels & Restaurants (79.5%), Transport, Storage & Communication (10.1%), Wholesale & Retail Trade; Repairs; Installation of Machinery & Equipment (10.6%), Other Services (10.4%), Finance & Insurance Services (2.7%), Real Estate, Renting & Business Activities (2.1%) and Electricity & Water Supply (5.8%). 
• Within the Goods Producing Industries, there were higher output levels for Agriculture, Forestry & Fishing of 13.8% and the Construction industry of 5.9%. However, there were declines in the Manufacturing and Mining & Quarrying industries of 2.2% and 60.5% respectively. The decline in Mining & Quarrying was due primarily to the major fire that occurred at the Jamaica Aluminum Company (JAMALCO) plant in August 2021, which resulted in reduced activities at the plant in the fourth quarter of 2021. 
• We expect the mining industry to continue to contract in 2022 as the Alpart and Jamalco plants remain completely closed. The Alpart plant has been closed since 2019 to facilitate modernisation and expansion, following the fire in August 2021. It is estimated that the Jamalco plant will also remain closed until June 2022, when it will be partially reopened. The falloff in alumina production is occurring at a time when global aluminum prices are up 20.4% year to date due to the Russian Ukraine conflict. The decline in production at this time means that the island will not capture much of the benefit associated with the higher price. 
• Preliminary estimates for the calendar year 2021 showed that the economy grew by 4.6% with the Services Industries and the Goods Producing Industries expanding by 4.7% and 4.3%, respectively.

(Source: STATIN & NCBCM Research)

• The Government of Dominica has approved the establishment of a National Financing Vehicle (NFV) to provide financial and technical support to renewable energy, energy efficiency, blue economy and low carbon projects. 
• The objectives of the NFV include: supporting the government’s policy objectives on transitioning to a low carbon climate resilience economy by making available long-term affordable climate finance; attracting private sector investments; supporting the use and application of renewable energy and energy-efficient technologies in Dominica and; to develop the local capacity to underwrite climate finance projects. 
• Permanent Secretary in the Ministry of Planning, Economic Development, Climate Resilience, Sustainable Development, and Renewable Energy, Gloria Joseph noted that the capability of the Government of Dominica and the local private sector to finance climate change mitigation and adaptation projects is limited. It is believed that the increased adoption of sustainable energy technology can free up some space by means of reducing operational expenses, but investments to make this happen is often lacking. 
• The government also recognizes the key role of the private sector for national success in the implementation and achievement of climate mitigation and adaptation actions; however, they are mindful of the financial barriers to the private sector in performing this role. As such, the Government of the Commonwealth of Dominica is in part utilizing the green climate fund to provide substantial facilitation services to the private sector to allow for the execution of this function.

(Source: Dominica News Online)

• The National Gas Company (NGC) has signed a gas sales contract (GSC) with local manufacturer Trinidad Cement Ltd (TCL). The agreement will govern the sale of natural gas to TCL and represents an important step forward for both companies after an extended period of negotiations. 
• Both NGC and TCL recognised that the outcome would serve the commercial interests of all stakeholders, including the generation of foreign exchange and other economic benefits that will accrue to Trinidad and Tobago. 
• Notably, NGC’s president Mark Loquan said the current upheavals in global supply chains underscore the importance of building local industrial capacity to meet internal market demands. Therefore, the team at NGC is intent on securing the future of our downstream sector, through agreements such as this GSC with one of the company’s nation's local manufacturers. 
• It noted that TCL has been a customer of NGC for over 40 years, making it one of the wholly State-owned company's longest-standing commercial partners. This GSC signals NGC's commitment to the local manufacturing sector, which bodes well for infrastructural development in Trinidad and Tobago and the region.

 (Source: CariCris)

• President Joe Biden on Thursday launched the largest release ever from the U.S. emergency oil reserve to try to bring down gasoline prices that have soared during Russia's war with Ukraine. 
• Starting in May, the United States will release 1.0Mn barrels per day of crude oil for six months from the Strategic Petroleum Reserve, a senior administration official told reporters. The 180.0Mn barrels is equivalent to about two days of global demand, and marks the third time Washington has tapped the SPR in the past six months. 
• The release will more than cover oil exports to the United States from Russia, which typically produces about 10.0% of the world's crude, but only accounts for 8.0% of U.S. liquid fuel imports. Biden banned U.S. imports of Russian oil this month. 
• However, the release will fall short of a loss of about 3Mn bpd of Russian oil, which the International Energy Agency (IEA) estimates will be lost to global markets amid Western sanctions and as global buyers avoid the oil. In an effort to tackle soaring oil prices, IEA member countries are set to meet on Friday to discuss a further emergency oil release, following their March 1 agreement to release about 60Mn barrels. The oil release will serve as bridge until the end of the year when domestic production ramps up.

(Source: Reuters & NCBCM Research)

• Gold on Thursday was headed for its biggest quarterly gains since the pandemic-led surge in mid-2020 as concerns over soaring consumer prices and the Ukraine crisis bolstered bullion's safe-haven appeal. 
• Spot gold was up 0.4% at $1,940.95 per ounce by 12:22 p.m. EDT (1622 GMT). For the month, bullion was up about 1.7%. U.S. gold futures rose 0.4% to $1,946.90. 
• RJO Futures senior market strategist Bob Haberkorn has said that the geopolitical situation has been dragging for a month now and inflation data continues to rise. So the overall sentiment in this market right now is people looking for safety, and gold is considered a safe investment during times of political and financial uncertainty. 
• Data showed U.S. consumer spending slowed significantly in February, while price pressures continued to mount, with the largest annual spike in inflation since the early 1980s. Russia's invasion, which began on Feb. 24, has fuelled a rally in oil prices and industrial metals. 
• Haberkorn noted that there could be a pullback in gold if there is some positive news that comes out of the Russia-Ukraine conflict, but thinks traders will look at that as a buying opportunity because of inflation fears.

(Source: Reuters)

• The Bank of Jamaica (BOJ) announced that effective 30 March 2022, the rate offered on overnight balances on the current accounts of deposit-taking institutions, the policy rate, will be increased to 4.50 % per annum from 4.00% per annum. 
• At its meetings on March 25 and 28, 2022, the Bank’s monetary policy committee (MPC) noted that inflation continued to breach the upper limit of the its target range in February 2022. Importantly, the bank expects inflation to continue to breach the target range for a more extended period and at higher rates than previously anticipated. 
• The invasion of Ukraine by Russia has increased the level of uncertainty in the environment and has resulted in upward pressure on international commodity prices which have contributed to a further rise in domestic inflation and inflation expectations. 
• Along with the policy rate, the committee also decided to continue pursuing other measures, such as FX interventions, to contain Jamaican dollar liquidity expansion and maintain relative stability in the foreign exchange market. 
• In light of the increase in interest rates on deposits and loans, liquidity conditions are expected to remain tight, thus making saving in Jamaican dollars more attractive relative to foreign currency assets and borrowing in Jamaican dollars more expensive.

(Source: Bank of Jamaica)

• The government will likely contain current expenditures in FY2022/23 as it reduces outlays on social spending. On March 8, the Minister of Finance, Dr. Nigel Clarke, introduced a JMD912.0Bn budget for FY2022/23, which Fitch expects will pass in late March or early April as the government holds a legislative majority. 
• It is expected that the final budget will limit social spending and cash transfer programmes enacted during the COVID-19 pandemic, reducing current expenditure to 25.2% of GDP, from an estimated 26.1% in FY2021/22. 
• That said, the final budget will likely increase public sector wages and capital expenditures for the coming quarters. Clark announced a reform, which will go into effect on April 1 that will raise public wage and employee compensation spending to 11.7% of GDP in FY2022/23, from 10.8% in FY2021/22. 
• The government will also lift capital expenditures by 14.0% in FY2022/23, from an estimated 12.0% increase in FY2021/22, as the administration increases funding for infrastructure projects, particularly upgrades to roads, bridges and public transit that began in 2021, after public capital expenditure fell by 30.1% in FY2020/21.

(Source: Fitch Solutions)

• Fitch Solutions forecasts that Guyana’s fiscal deficit will fall to 3.8% of GDP in 2022, from an estimated 4.9% in 2021, as rebounding economic activity and expanding output from the oil sector generated revenue growth of 21.2% y-o-y in H1 2021, outpacing the 16.5% growth in government expenditures during the same period. Fitch’s Oil & Gas team currently forecasts that the price of Brent crude oil will average USD82.0/barrel (/bbl) in 2022, up from USD71.0/bbl in 2021. Consequently, generating higher revenue intake of 50.2% in 2022, up from 25.2% in 2021, for the Guyanese government. 
• In addition, several recently passed regulatory changes will likely bolster revenue from the non-oil sector. On January 3, 2022, the government approved the Guyana Natural Resource Fund (NRF) Act, which will integrate the oil sector with the non-oil economy by mandating that international oil companies source specific goods and services from domestic businesses. Such goods and services vary, ranging from environmental impact studies conducted before drilling to platform and steelwork used for constructing oil rigs. 
• President Irfaan Ali’s government will increase expenditures by 41.0% in 2022 as it expands spending on public infrastructure projects and social services, such as the development of solar and hydroelectric farms and schools and health care facilities. On February 11, the government passed a GYD552.0Bn (approximately USD25.4Bn) budget for 2022, significantly larger than 2021’s GYD383.0Bn budget. The spending increases will be financed entirely by oil revenues, rather than tax increases on the Guyanese population. 
• Public debt will likely peak at 38.4% of GDP in 2022 and then fall in the years thereafter as strong revenues persist and the government’s narrower fiscal deficits limit the issuance of new debt. Debt rose more rapidly from 2019 to 2021 as the government financed the fiscal deficits with additional bond issuances, pushing total public debt from GYD368.5bn in 2019 to GYD540.5Bn in 2020. However, in the medium term, narrower budget deficits and strong GDP growth will cause government debt to fall as a percentage of GDP.

(Source: Fitch Solutions)

• Barbados’ real GDP growth is expected to accelerate from 1.7% in 2021 to 7.5% in 2022 as the effects of the COVID-19 pandemic diminish. Following a slower than expected rebound in international tourism in 2021, over the coming months, Fitch expects that growing demand for international tourism and rising vaccination rates in source markets will provide tailwinds to growth. 
• However, rising oil prices caused by the Russia-Ukraine conflict will keep energy and commodity prices elevated in both Barbados and key tourism source markets, weakening purchasing power, possibly resulting in elevated ticket prices and undercutting growth. 
• In accordance with Barbados’ debt reduction programme, it is expected that expenditure growth will slow to 4.2% in FY2021/2022, from 15.1% in FY2020/2021. Over the coming years, the government is expected to further tighten fiscal policy as pandemic-era spending is removed. After government debt exceeded 160.0% of GDP in 2018, Barbados entered into a four-year Extended Fund Facility with the IMF. While the guidelines of the programme were temporarily suspended to account for Covid-19-related spending, the government will return to prioritising fiscal consolidation in 2022, inhibiting growth. 
• In addition, investment has remained muted in recent years. The rapid rise in government debt weakened Barbados’ attractiveness for investment. Foreign direct investment increased by just 2.6% y-o-y in H1 2021, from an estimated 22.0% increase in 2020. Over the coming months, however, we expect that the recovery in the tourism industry will boost investment sentiment only modestly, hindering overall growth. 
• Risks to the Agency’s growth forecast are weighted to the downside, if inflation should continue to rise above analysts’ expectations in Barbados’ key source markets, such as the US (6.1%) or UK (6.2%), then demand for international travel would weaken, hindering growth. Additionally, rising COVID-19 case levels in either Barbados or source markets may disincentivise traveling abroad, further delaying a full recovery of the tourism sector.

(Source: Fitch Solutions & NCBCM Research)

• A key part of the yield curve inverted on Tuesday, as the 2-year U.S. Treasury note yield rose above the benchmark 10-year U.S. Treasury note yield for the first time since September 2019. An inversion of the two-year to 10-year (spread) part of the curve is viewed by many as a reliable signal that a recession is likely to follow in one to two years. 
• While the brief inversion in August and early September 2019 was followed by a downturn in 2020, no one foresaw the closure of businesses and economic collapse due to the spread of COVID-19. 
• Investors are concerned that the Federal Reserve will dent growth as it aggressively hikes rates to fight soaring inflation, with price pressures rising at the fastest pace in 40 years. Fed funds futures traders expect the Fed's benchmark rate to rise to 2.61% by February 2023, compared to 0.33% today. 
• Another part of the yield curve that is also monitored by the Fed as a recession indicator remains far from inversion. That is the three-month to 10-year (spread) part of the curve, which is currently at 182 basis points. Some analysts say that the curve has been distorted by the Fed's massive bond purchases, which are holding down long-dated yields relative to shorter-dated ones. 
• Short and intermediate-dated yields have jumped as traders price in more and more rate hikes. Meanwhile, analysts say that the U.S. central bank could use roll-offs from its massive $8.9Tn bond holdings to help re-steepen the yield curve if it is concerned about the slope and its implications.

(Source: Reuters)