• Bloomberg reported that the withdrawal of the tax reform bill, which aimed to restructure the tax system and boost revenue collection, led to a decline in Dominican bonds. However, President Luis Abinader had predicted that this drop would be temporary.
• President Luis Abinader ordered the withdrawal of the Fiscal Modernization bill from the Chamber of Deputies. The formal withdrawal was announced by Alfredo Pacheco, President of the Chamber of Deputies, following a request from the Executive Branch.
• President Abinader had previously addressed the nation, emphasising his commitment to democracy and listening to the people’s concerns. He acknowledged that the Fiscal Modernization bill lacked the necessary consensus and stressed that a democratic government must be willing to amend decisions based on public feedback, stating, “I am a president who listens.”
• According to Bloomberg, “Dollar notes accelerated emerging market losses on Monday, with those maturing in 2060 losing up to 2.6 cents on the dollar, trading below 90 cents.” The reform aimed to raise revenue by 1.5% of GDP by increasing taxes on income, businesses, and property while reducing incentives for the film and tourism industries.
• Credit rating agencies have not (yet) reacted to the withdrawal. Currently, Fitch Ratings and Moody’s have rated the Dominican Republic three points below investment grade at BB-/Positive and Ba3/Positive, while S&P Global rates it one level higher at BB/Stable.
• Seaport Global highlighted to clients that the withdrawal was a significant setback for the country’s goal of achieving investment-grade status during Abinader’s administration. Uncertainty remains about how fiscal consolidation will be achieved, despite limits on real-term primary spending.

(Source: Dominican Today)

• The Barbados-based Caribbean Development Bank (CDB) has secured a significant upgrade to its accreditation from the Green Climate Fund (GCF), enabling the region's financial institution to develop and deliver individual climate programmes and projects valued at as much as US$250Mn.
• The CDB said that the figure is a significant increase on the previous limit of US$50Mn and will enable it to implement larger, more impactful climate response initiatives in partnership with the GCF.
• The GCF approved the upgrade on Monday, October 21, during its 40th board meeting with the Republic of Korea.
• The new threshold will enable the CDB to boost concessional climate finance for the Caribbean, accelerating climate action in the region. The expanded financing capacity also allows the CDB to help its client countries develop larger climate change adaptation and mitigation projects, particularly in capital-intensive sectors.
• Additionally, CDB is now better positioned to support regional programmes, broadening its reach and achieving economies of scale. 
• Valerie Isaac, CDB's division chief of Environmental Sustainability, said the approval reflects a vote of confidence in the CDB's ability to deliver the types of large-scale, transformational initiatives that can bolster climate change response for the region given our extreme vulnerability.

(Source: Trinidad Express Newspaper)

• U.S. economic activity was little changed from September through early October. Additionally, firms saw a slight uptick in hiring, continuing recent trends that have reinforced expectations the Federal Reserve will opt for a smaller 25-basis-point reduction in borrowing costs in two weeks.
• The U.S. central bank's latest temperature check on the economy’s health showed that inflation pressures continued to moderate. Moreover, input prices generally rose faster than selling prices, denting firms' profit margins.
• Inflation and the broader economy remain a key issue among voters ahead of the Nov. 5^th U.S. presidential election. A string of stronger-than-expected economic data and inflation, consumer spending and job gains has caused investors to dial back bets on the pace and extent of rate cuts.
• The resilient economy has been underpinned by firm income growth and ample household savings. Though labour market momentum has slowed, the level of layoffs remains historically low, supporting wage gains. U.S. job gains increased by the most in six months in September and the unemployment rate fell to 4.1%, while retail sales increased solidly last month.
• The steadiness of the labour market was reflected in the latest survey, with more districts than in the prior survey reporting slight-to-moderate growth. Demand for workers, however, eased somewhat. A source at a Minnesota supply company told the Minneapolis Fed "I about fell out of my chair" at the interest it received for a high-skill driving position it had previously struggled to fill.
• However, there were few signs of outright deterioration, with layoffs remaining limited. The San Francisco Fed noted that some employers had begun hiring for open positions that had been on hold for the past year, while wages across Fed districts "generally continued to rise at a modest to moderate pace."

(Source: Reuters)

• The United States said for the first time on Wednesday that it had seen evidence that North Korea has sent 3,000 troops to Russia for possible deployment in Ukraine, a move that could mark a significant escalation in Russia's war against its neighbour.
• U.S. Defense Secretary Lloyd Austin, speaking in Rome, said it would be "very, very serious" if the North Koreans were preparing to fight alongside Russia in Ukraine, as Kyiv has alleged. He also said it remained to be seen what they would be doing there.
• The U.S. determined the North Korean soldiers were transported by ship in early-to-mid October from North Korea's Wonsan region to the eastern Russian city of Vladivostok before being taken to three military training sites in eastern Russia, said Kirby.
• In Seoul, South Korean lawmakers said that Pyongyang had promised to provide a total of about 10,000 troops, whose deployment was expected to be completed by December, the lawmakers told reporters after being briefed by South Korea's national intelligence agency. The United States said the alleged North Korean deployment could be further evidence that the Russian military was having problems with manpower.
• The Kremlin has previously dismissed Seoul's claims about the North's troop deployment as "fake news" and a North Korean representative to the United Nations in New York called it "groundless rumours" at a meeting on Monday. Moscow and Pyongyang have also denied weapons transfers, but they pledged to boost military ties and signed a mutual defence treaty at a summit in June.

(Source: Reuters)

• The U.S. economy will continue to provide most of the thrust for global growth through the balance of this year and in 2025, led by robust consumer spending that has held up through a wrenching bout of inflation and the high interest rates used to tame it, the International Monetary Fund said on Tuesday.
• In its latest World Economic Outlook, the IMF raised its 2024 and 2025 economic growth forecasts for the U.S. - the only developed economy to see its outlook marked up for both years - and its chief economist said the "soft landing" sought by the Federal Reserve in which inflation eases without big damage to the job market had largely been achieved.
• Still, it warned that risks abound from armed conflicts, potential new trade wars and the hangover from the tight monetary policy employed by the Fed and other central banks to rein in inflation.
• The IMF revised its 2024 U.S. growth forecast upward by two-tenths of a percentage point to 2.8% due largely to stronger-than-expected consumption fueled by rising wages and asset prices. The global lender also upgraded its 2025 U.S. growth outlook by three-tenths of a percentage point to 2.2%, slightly delaying a return to trend growth.

(Source: Reuters)

• The International Monetary Fund on Tuesday raised its forecast for British economic growth this year but said the country could not take its eye off rising public debt, as finance minister Rachel Reeves prepares her first annual budget.
• The IMF said it expected 2024 growth of 1.1% this year, up from its previous forecast of 0.7%, due to lower inflation and a cut in Bank of England interest rates. It did not raise its outlook for 2025. IMF chief economist Pierre-Olivier Gourinchas also warned that Britain, like many other rich nations, required robust plans to stop the rise in public debt.
• Britain's government currently has a rule that budgets must ensure public debt falls between the fourth and fifth year of official forecasts from its budget watchdog. Reeves is considering changing the definition of debt used in her Oct. 30 budget to allow more borrowing for long-term investment.
• Last month the Organisation for Economic Co-operation and Development said Britain's debt rule had curtailed public investment without successfully containing debt. Britain's was the largest IMF forecast upgrade of any of the Group of Seven economies, and the country is now on track to have the joint third-fastest growth in the G7 alongside France.
• The news was seized on by the Conservative opposition to the new Labour Party government, who dispute Reeves' claim that they left a poor economic legacy after 14 years in power. "Today's data from the IMF confirm the economic inheritance from the last Conservative government was strong," former finance minister Jeremy Hunt said.
• The IMF's 2024 forecast is now higher than the Office for Budget Responsibility's (OBR’s) projections which underpin government budget plans. However, the Fund is less optimistic about 2025 than the OBR, limiting the potential upside for Reeves, who said she would press ahead with shoring up the public finances.
• Reeves and Prime Minister Keir Starmer have suggested higher taxes on employers and wealthier people are likely in the budget. Last year Britain's economy grew 0.3% and suffered a shallow recession in the second half of the year, but it rebounded relatively strongly in the first six months of 2024.

(Source: Reuters)

• Caribbean Community (Caricom) countries could benefit from a decision by the International Monetary Fund (IMF) to approve a set of reforms to its concessional lending facilities and an associated funding strategy to preserve the IMF's ability to provide adequate support to low-income countries (LDCs) over the long term.
• Of note, the IMF’s Executive Board reached a consensus on reforms of charges, surcharges, and commitment fees that will substantially reduce the cost of borrowing from the General Resources Account (GRA). This consensus occurred amid high global interest rates and safeguards the IMF’s financial capacity to support its members in need.
• The reform package is expected to lower IMF borrowing costs for members by about US$1.2Bn annually and reduce payments on the margin of charges and surcharges on average by 36%. The number of surcharge payers is expected to decline from 20 to 13 countries (in FY2026).
• Additionally, the IMF will reduce the margin paid over the Special Drawing Rights (SDR¹) interest rate and the time-based surcharge rate. Moreover, it will also increase the borrowing thresholds above which level-based surcharges and commitment fees apply. These changes will take effect on November 1, 2024.
• In the past Caribbean countries complained about the policies by which concessional financial assistance might be extended to help their economies, proposing, for example, that consideration be given to having credit extended to countries that have already invested in green technology.
• These reforms, therefore, balance the interests of borrowers and lenders by meaningfully reducing borrowing costs while preserving the price-based incentive mechanism and income generation capacity. 

_____________________________

¹ The SDR is an international reserve asset. The SDR is not a currency, but its value is based on a basket of five currencies-the US dollar, the euro, the Chinese renminbi, the Japanese yen, and the British pound sterling. One SDR=US$1.33 cents.

(Sources: IMF & Trinidad Express Newspaper)

• Foreign Direct Investment (FDI) into the Latin America and Caribbean region has recovered strongly in the last two years, following a Covid slump.  While data for 2024 has been mixed, Fitch Solutions remains optimistic that this is the beginning of a structural uptrend driven by several factors.
• First, efforts by United States (US) firms to ‘derisk’ their supply chains as the great power competition between the US and China rumbles on should support nearshoring flows into Mexico, Central America and parts of the Caribbean in particular.
• Second, the green transition will boost demand for the likes of copper and lithium, helping to drive investment into the extractive sector in economies such as Argentina, Chile, Peru and to a lesser extent Bolivia.
• Fitch also sees some scope for these economies to move up the value chain, with the potential for more of the processing of these metals and minerals to be done in local markets.
• Latin America is expected to play a large role in feeding the world’s growing population, which is expected to rise by 25% to about 10Bn by 2050. This poses substantial upside to the Brazilian economy in particular, where land is still underutilised.
• Importantly, inflows into Central American countries – beyond Costa Rica and Panama – can provide employment opportunities, stemming the flow of migrants into the US.

(Source: Fitch Solutions)

• According to the Bank of Jamaica (BOJ), Jamaica’s Net International Reserves (NIR) stood at US$5,200.53Mn at the end of September 2024, 3.9% higher than September 2023. This improvement in the NIR can be attributed to a 3.7% (or US$186.60Mn) increase in total foreign assets along with an 11.5% decline (or US$9.04Mn) in Foreign Liabilities.
• The rise in foreign assets was due to growth in Currency and Deposits to US$3,582.62Mn from US$3,412.48Mn, Securities (+1.1% or US$17.34Mn) and IMF Reserve Position balance (+0.7% or US$267.10K). However, this was slightly tempered by a 5.4% (or US$1.14Mn) decline in Special Drawings Rights.
• In September, the BOJ intervened in the foreign exchange market four times, injecting a total of US$140Mn in an attempt to stabilise the Jamaican dollar. This represented a decline from August when the BOJ conducted six interventions totalling US$180Mn.
• Jamaica’s September 2024 NIR remains relatively high and equates to 26.3 weeks of goods & services imports (25.3 weeks at the end of August 2024). At this level, the NIR is more than double the international benchmark of 12 weeks of imports. 
• Maintaining an adequate level of reserves is one of the key pillars of underwriting and ensuring macroeconomic stability. The NIR reflects the difference between gross reserves and the country’s IMF loan debts. Gross reserves measure the total value of foreign exchange and monetary gold reserves, special drawing rights, IMF reserve positions, and other assets denominated in dollars.

(Sources: BOJ and NCBCM Research)

• QWI Investments Limited (QWI) reported a net profit of $133.07Mn for its financial year ending September 2024 (FY24), a significant turnaround from the $44.12Mn net loss recorded in FY 2023. The results were spurred by strong performance across both local and overseas portfolios.
• QWI’s overseas portfolio appreciated 30.9% during the year, generating unrealised gains of $177.64Mn primarily driven by a 41% increase in its US portfolio, which represents most of QWI's overseas investments. Realised gains from its overseas portfolio grew 140.4% year-over-year to $21.26Mn.
• Similarly, market conditions in Jamaica also improved contributing to unrealised gains of $72.39Mn, a significant recovery from the unrealised losses of $94.44Mn recorded in the prior year.
• As at September 30, 2024, QWI's top U.S. holdings were Meta and Nvidia valued at US$0.57Mn and US$0.49Mn respectively, while its top Jamaican holdings are Access Financial Services and Dolphin Cove valued at J$184.4Mn and J$150.2Mn respectively.
• As the portfolio expanded, administrative and selling expenses rose 12.2% largely driven by higher accruals for investment management costs.
• The performance of its local portfolio could continue to improve over the near term. Of note, the company has undertaken the strategic sale of a poorly performing stock that had previously been difficult to sell. Locally, corporate earnings continue to be mixed. However, the decline in the market bodes well for future gains in the local stock market as investors reallocate funds from fixed-income investments and demand for stocks rises.
• QWI’s stock price has increased by 27.9% since the start of the calendar year to $0.78 on October 22, 2024, and it currently trades at a 40.9% discount to its net asset value (NAV). The most recent NAV per share was $ 1.32 as at October 11, 2023.
• This discount to NAV is a long-standing characteristic for other listed funds in QWI’s peer group, which can significantly affect investors' ability to realise the true value of their investments.

(Sources: QWI Financials & NCBCM Research)