• The outlook for the U.S. economy remains weak despite a temporary cooling of the U.S.-China trade war, a Reuters poll of economists showed, with a debate over the country's fiscal health hanging in the balance.
• A 90-day truce to temporarily slash steep U.S.-China import duties has marginally reduced U.S. recession risks, but the fiscal outlook is worsening ahead of an imminent vote in Congress on President Donald Trump's sweeping tax-cut bill following a sovereign credit rating downgrade from Moody's on Friday.
• Economists in a May 14-21 Reuters poll were unanimous the Trump administration's policies have hurt the economy, with over 55% saying "significantly hurt". However, after big downgrades to their growth and upgrades to inflation forecasts in April, economists kept these broadly unchanged in May.
• The US economy, which contracted 0.3% last quarter largely due to a record surge in imports, is forecast to grow 1.5% this quarter. It would grow just 1.4% this year, a sharp slowdown from last year's 2.8%. Next year, it was forecast to expand 1.5%. The median probability of a U.S. recession over the coming year did, however, decline to 35% from 45% in April.
• Economists barely changed their views on inflation, expected to average above the Fed's 2% target until at least 2027, echoing consumer expectations which are already at a multi-decade high.
• Fed officials have highlighted elevated risks of a resurgence in inflation, primarily due to U.S. tariff policies and appear to be in no hurry to cut rates anytime soon. The federal funds rate has stayed in a 4.25%-4.50% range since the start of this year.

Source: Reuters)

• Buoyant credit and stock markets appear "out of sync" with a world gripped by geopolitical and trade uncertainty, the European Central Bank said on Wednesday.
• The warning came as part of the ECB's twice-yearly Financial Stability Review, a litany of old and new risks ranging from funds depleting their cash buffers to overvalued property markets and high government debt.
• In the latest edition, the ECB said investors might be underestimating the risk that the economy performs worse than expected, trade tensions escalate or an expected easing of monetary policy fails to materialise. "Despite the drawdowns, equity valuations remain high while credit spreads still appear out of sync with underlying credit risk," ECB vice-president Luis de Guindos said in his foreword.
• The ECB also described tariffs as "major downside risk", estimating that an increase of one standard deviation in an index measuring trade policy uncertainty lowered the median growth forecast by 0.15 percentage points after four quarters. Such a surge in uncertainty also pushed down banks' share prices by 10.4% after six months and increased their cost of borrowing on the bond market by 7 basis points, the ECB said.
• Among other risks, the ECB listed cyber attacks, concentrated investments in private markets and growing - if still tenuous - linkages between cryptocurrencies and traditional finance.

(Source: Reuters)

• Following its Monetary Policy Committee (MPC) meetings on May 16 and 19, 2025, the Bank of Jamaica (BOJ) announced a 25 basis points cut to the policy rate to 5.75%. This cut follows two rate pauses at 6.0% in February and March of 2025. The BOJ’s rate cut decision was influenced by a favourable inflation outlook and expectations of moderate improvements in the economy.
• The BOJ’s decision incorporated the fact that annual headline inflation for April 2025 of 5.3%¹ was in line with the outturn for April 2024. The stable and relatively low inflation primarily reflected the non-recurrence of price increases for regulated items (such as bus and taxi fares), which offset higher food inflation. Importantly, core inflation, which excludes the volatile prices of agricultural food products and fuel, was 4.4%, remaining below the upper limit of the 4.0% to 6.0% target since July 2023.  Moreover, the exchange rate, imported inflation, and the private sector’s expectations of future inflation have been fairly stable.
• On the economic front, the BOJ forecasted moderate improvements to the real economy “following the effects of recent shocks”. Real gross domestic product (GDP) is projected to recover in 2025, largely due to normalisation in the mining, tourism, and construction sectors. In this context, employment levels remain high, even as anecdotal data suggest that wage pressures are moderating. The central bank also noted that the current account of Jamaica’s balance of payments is projected to remain in surplus over the near term, and that international reserves are healthy and projected to improve further.
• Notwithstanding the positive inflation and economic signs, the central bank noted that inflation could exceed projections if geopolitical tensions escalate further, potentially disrupting international supply chains. Conversely, inflation may fall below expectations if international commodity prices decline more than anticipated or if demand conditions weaken. At the same time, the central bank highlighted uncertainty from the fast-evolving policies in the United States (US) and the global economy, and their potential implications for the domestic economic outlook.
• That said, the MPC communicated that it would be prepared to adjust the stance of monetary policy if the above-noted risks crystallise and result in an upward deviation from the inflation target.

________________________________
¹According to the Statistical Institute of Jamaica (STATIN)

(Sources: BOJ & NCBCM Research)

• Kingston Properties Limited (KPREIT) reported a net profit of US$1.00Mn for the three-months ending March 2025 (Q1 2025), representing a 5.8% increase compared to the same period last year. This performance reflected strong revenue growth, which was largely muted by rising costs. 
• The expansion of KPREIT’s property portfolio and effective property management led to higher rental income and increased property values. Rental income for Q1 2025 totalled US$1.38Mn, reflecting a 24.4% increase compared to Q1 2024. This growth was primarily driven by the addition of the 2530 Aztec West Business Park, a fully tenanted 20,000-square-foot office building in the UK and the Duke Street buildings in Jamaica, as well as improved rental rates across several properties in the portfolio.
• The growing rental income was met by a 50.0% increase in operating expenses to US$0.58Mn, driven by higher staff costs, increased professional fees related to the expansion of the UK portfolio, as well as broker fees and legal costs associated with leasing vacant spaces in Jamaica and the Cayman Islands. On the balance of faster growth in operating expenses, operating profits increased by 10.6%, which is lower than revenue growth.
• Lower fair value gains and higher net finance costs also contributed to the muted profits. The company’s fair value gains of US$0.37Mn for Q1 2025 were 37.3% lower than in Q1 2024 despite recognised gains after reclassifying an asset for disposal. Meanwhile, net finance costs increased by 18.1% to US$0.39Mn due to the growth in its debt portfolio, which funded the increase in its real estate assets under management. Notably, the company’s entrance into the UK via Aztec was financed by a US$21Mn senior secured term facility from CIBC Caribbean that also refinanced existing debt¹.
• KPEIT’s stock price has declined by 0.2% year-to-date, closing at JMD$9.41 as of Tuesday. At this price, the stock is trading at a price-to-earnings (P/E) ratio of 9.9x, which is lower than the Main Market Real Estate Sector’s average of 11.2x.

________________________________
¹The move aligns with KPREIT’s growth strategy to diversify geographically and optimise funding.

(Sources: JSE & NCBCM Research)

• Capital raised for startups in Latin America grew 26% in 2024 from 2023, more than in Europe, which was up 7%, and Southeast Asia, which shrank 34%, according to a study published on Tuesday, May 20, 2025.
• Funding for Latin American startups is also expected to increase in 2025 thanks to a young population, accelerated digitalisation and increasingly sophisticated capital, said the report from Mexican entrepreneurship network Endeavour and private equity firm Glisco Partners.
• Still, the industry faces challenges from low participation of local investment funds in later-stage investments and global volatility, the study said. "2024 was a year for redefinition. Startups that managed to adapt to changes in the market now have more solid and sustainable models," said Alfredo Castellanos, managing partner at Glisco Partners.
• The report noted domestic investors tended to invest early, while foreign ones did so after companies were more established and scalable. Capital injections in mature companies, rather than brand new ones, are increasingly dominant. Such investments made up 65% of all capital raised in 2024, compared to 46% in 2023. "There are fewer rounds, but more capital," the report said.
• Through 2025, the report identified three main trends, including the use of venture debt and mixed rounds, which combine risk capital and debt, as alternative ways of investing. Additionally, annual growth in secondary markets, where investors can buy and sell shares from each other rather than directly from the company, was projected to rise 60%, as a way for early-stage investors to secure liquidity.
• Finally, it found employee stock ownership plans were an increasingly relevant way of attracting and retaining talent, though less than 20% of Latin American startups offered them to employees due to uncertainty surrounding the financial implications.

(Source: Reuters)

• Brazil, the world's largest poultry exporter and main poultry meat importer into the European Union (EU), is no longer allowed to ship poultry and meat products to the EU due to the outbreak of bird flu, the European Commission said.
• This comes after Brazil confirmed its first outbreak of bird flu on a poultry farm last Friday, triggering protocols for a country-wide trade ban from top buyer China and state-wide restrictions for other major consumers such as Japan.
• "EU import conditions require that the country of export (Brazil) is free of Highly Pathogenic Avian Influenza," a European Commission spokesperson said in an email. "Brazilian authorities can no longer sign such animal health certificates for export into the EU, and such certificates cannot be issued. No poultry/meat products can be exported to the EU from any part of the Brazilian territory."
• Brazilian Agriculture Minister Carlos Favaro said that under existing protocols, countries including China, the European Union and South Korea would ban poultry imports from Brazil for 60 days. However, the Commission did not give any timeframe.
• In 2024, Brazil exported more than 5 million tons of poultry meat. Of these, approximately 4.4% headed to the EU, the Brazilian Animal Protein Association (ABPA) said. Of total EU poultry imports, Brazil is the main origin, with a share of 32% last year, according to official EU data. However, the volume remained rather thin, with most of the EU consumption supplied locally. Still, despite the small volumes, the cheaper, high-added-value Brazilian imports have pressured EU prices. A halt in imports is therefore likely to come as a relief for the local poultry industry.

(Source: Reuters)

• Britain's economy will grow a bit faster this year than thought a month ago, a Reuters poll of economists predicted, partly due to unexpectedly strong growth in the first quarter that was not expected to persist.
• Sentiment has improved following a basic trade deal with the United States, which still leaves a 10.0% tariff on British goods but lowers duties on cars and steel. Economists surveyed do not expect it to make much difference to growth.
• A strong minority of economists who contributed to both this month's and last month's polls, 22 of 50, raised their growth forecast for this year by 25 basis points on average, with the median at 1.0% versus 0.9% expected in April. It was the first median upgrade in five months.
• "The UK government is massively increasing spending this year. There's a lot of money coming in and that's going to act as a bit of a tailwind as well. Real wage growth is also still quite strong, so the economy still has some reasonable underpinnings", said James Smith, economist at ING.
• The Bank of England is expected to stick to one interest rate cut per quarter, with the next likely in August and then in November, ending the year at 3.75%. Still, economists and markets are braced for inflation to rise well above the BoE's 2.0% target before easing back by the middle of next year.

(Source: Reuters)

• Some market players urged the Bank of Japan (BOJ) to increase buying of super-long bonds, or terminate tapering for that maturity, in the wake of sharp rises in their yields, the central bank said on Tuesday.
• The requests, made in the BOJ's survey of bond market participants on its taper plans, underscore the challenge the central bank faces in removing remnants of its massive monetary stimulus.
• The yields on super-long Japanese government bonds (JGB) soared to all-time highs on Tuesday on weak investor demand, as political calls for big fiscal spending flare up ahead of an upper house election slated for July.
• The spike in yields comes at a delicate time for the BOJ, which will review next month an existing taper programme running through March, and come up with a plan for the next fiscal year and beyond.
• In the survey, most market participants saw no need to tweak the BOJ's existing taper programme. Instead, they were divided on the desirable pace of tapering from fiscal year 2026, with some calling for the bank to eventually stop buying JGBs altogether, while others said it should continue to buy up to 3 trillion yen ($20.77 billion) per month.
• However, most opinions called for maintaining or slightly slowing the pace of tapering, the summary showed, heightening the chance the BOJ will proceed slowly in reducing its huge balance sheet.

(Source: Reuters)

• Barita Investments Limited (Barita) reported a net profit of $1.18Bn for the six-month period ending March 2025, marking a 38.1% decline compared to the same period last year. This drop in profitability was largely driven by a weaker net operating income.
• Impacted by a 51.4% ($1.32Bn) reduction in gains from investment activities, mainly due to the underperformance of its real estate exposures, which were adversely affected by the depreciation of the Jamaican dollar, net operating income (NOI) fell 27.7%. The falloff in NOI occurred despite a 33.4% increase in Net Interest Income.
• Gains from its private equity holdings partially offset the underperformance of its real estate portfolio.  However, Fees and Commissions Income declined by 9.0%, primarily reflecting lower asset management fee income.
• Non-interest expenses for the six-month period ending March 31, 2025, declined by 15.5% to $1.97Bn aided by reductions in both administration expenses and staff costs. Administration expenses fell by 18.4% to $1.31Bn, driven by the reclassification of costs related to the core system replacement project to intangible assets. This adjustment stemmed from significant changes in the project’s implementation approach, which influenced the appropriate accounting treatment. Additionally, the 14.0% reduction in staff costs was largely the result of a restructuring exercise undertaken in the prior year.
• Notwithstanding the underperformance of its real estate exposures, and the expectation that the performance of its broader alternative investment (AI) portfolio to taper, management still expects to continue earning from its AI portfolio. Notably, Barita recently disclosed plans to develop a warehouse and mixed-use complex over the next 18 to 24 months via its wholly owned subsidiary, MJR Real Estate Holdings. This initiative aligns with the company’s strategic focus on broadening its portfolio, aimed at enhancing long-term returns and portfolio diversification.
• Barita’s stock price has declined by 3.3% year-to-date, closing at $71.10 as of Monday. At this price, the stock is trading at a price-to-book (P/B) ratio of 2.4x, which is notably higher than the Main Market Financial Sector’s average of 1.2x.

(Source: JSE & NCBCM Research)

• The Ministry of Agriculture, Fisheries and Mining, through its Veterinary Services Division (VSD), has taken an exclusionary approach to safeguard the poultry sector against the threat of Avian Influenza, commonly known as ‘Bird Flu’.
• According to Portfolio Minister, Hon. Floyd Green, the highly contagious virus is often transmitted by migratory birds and can be introduced to poultry farms through contaminated feed, equipment, clothing, or improperly declared imports. He added that the virus has a high mortality rate and can cause economic devastation to farmers and, ultimately, could lead to trade restrictions.
• This could prove devastating to Jamaica, where poultry is the largest source of animal protein and supports the livelihood of thousands of people, with backyard farmers accounting for 40% of the country’s total production. Consequently, the Ministry has taken measures to ensure that not a single case of Bird Flu enters Jamaica.
• The measures being undertaken include enhancing border protection, encompassing strengthened veterinary surveillance at ports of entry and increased screening of high-risk imports such as poultry products, live birds and feed materials; ongoing surveillance of wild bird populations by the VSD in collaboration with international partners; and implementation of robust biosecurity measures on small and large poultry farms.
• Other measures include public education and awareness, targeting farmers, backyard growers, vendors, and pet bird owners; and implementing emergency preparedness and response measures in the unlikely event that Bird Flu is detected in the country. He emphasised that partnership is essential for the success of various initiatives against Bird Flu, asserting that all stakeholders – both locally and regionally – must report suspicious illnesses, adhere to biosecurity guidelines, and remain vigilant and proactive.

(Source: JIS)