• Fiscal discipline will continue to play a critical role in Jamaica’s economic strength and future prosperity. That was the commitment from the Minister of Finance and the Public Service, Hon. Fayval Williams, as she opened the Budget Debate for fiscal year 2025/26 in the House of Representatives on Tuesday, March 11, 2025.
• Jamaica’s debt-to-GDP ratio is projected to decline to 68.7% by the end of FY2024/25, marking its lowest level in nearly 30 years. Minister Williams also acknowledged the Independent Fiscal Commission’s assessment that Jamaica’s fiscal position and policies are sustainable and that the legislated debt-to-GDP target of 60% or lower by FY2027/28 is on track to be achieved.
• The Minister, however, cautioned against calls to deplete the net international reserves (NIR) for short-term gains, emphasising its crucial role as a financial safety net against external shocks. The NIR stood strong at US$5,583.7Mn as at December 31, 2024.
• In terms of planned commitments for the upcoming fiscal year, the Government will be increasing the personal income tax threshold (PIT) to J$2Mn over three years, commencing April 1, 2025; reducing the bond on duties paid by new-car dealers from 100% to 20%; reducing the rate of dividend withholding tax (DWT) for dividends paid to non-residents (whether individuals or companies) to 15%; reducing electricity tax to 7% from 15%; increasing the annual turnover threshold for General Consumption Tax (GCT) registration from J$10Mn to J$15Mn and exploring the creation of a Micro Market segment on the Jamaica Stock Exchange for Micro, Small, and Medium Enterprises (MSME’s).
• Other initiatives include changes to the capital allowance regime to incentivise taxpayers to undertake investments and upgrades in production equipment, factories and other commercial buildings; increasing the repayment tenor for students who benefit from the Student Loan Bureau to 10 years; and imposing a J$1Bn subsidy to assist the first 20,000 customers who sign up with Jamaica Public Service Company for prepaid electricity.
• These initiatives are set to facilitate overall economic growth through various economic agents. The positives include encouraging households in targeted communities to formalise electricity consumption to more equitably spread the cost for the service; enable investors from around the world to invest directly in Jamaica at a more competitive and effective rate of income tax; and stimulate investment by manufacturers, producers and other commercial enterprises as they invest in and retool their business in 2025 and 2026. That said, the increase in the PIT threshold is a popular but expensive measure; it remains to be seen how this PIT threshold increase will be funded over the next three years.
• Overall, the government is set to execute these promises whilst maintaining a small fiscal surplus despite having the ability to run a deficit equivalent to “no more than 0.3% of GDP” based on fiscal rules. The fiscal year 2025/26 budget will be funded with J$949.5Bn of tax revenues, J$139.8Bn of non-tax revenues, J$812Mn of bauxite levy, and J$5.96Bn of grants. A total national expenditure budget of J$1.26Tn.

(Sources: JIS, PWC & NCBCM Research)

• Jamaica’s current account surplus is set to amount to 1.7% of GDP in 2025, up from 1.2% of GDP in 2024, boosted by stronger tourism exports and lower oil import prices. This will be the country’s third consecutive annual current account surplus, sustaining a reversal that began in 2023.
• Between 2003 and 2022, Jamaica only achieved one current account surplus, with an average annual deficit of 6.8% of GDP. Fitch expects surpluses to persist in the coming years, averaging 1.7% of GDP over 2025-2029.
• The current account surplus narrowed from 2.9% of GDP in 2023 to an estimated 1.2% in 2024 due to a sharp decline in exports, partly resulting from disruption to tourism arrivals, re-exports and alumina shipments caused by Hurricane Beryl in Q3 2024. However, stronger exports in 2025 will reverse the narrowing of the current account surplus that occurred in 2024.
• Goods exports are set to increase by 1.5%, boosted by stronger alumina shipments; however, lower oil prices will reduce oil export revenues in 2025, although the decline will be mitigated by increased export volume. Nonetheless, the goods trade balance will remain firmly in deficit as imports and exports rebound at similar speeds.
• Stronger tourism exports will be the main driver of the expanding current account surplus. Services exports are expected to increase by 5.5% in 2025, accelerating from 1.5% growth in 2024. Tourist arrivals are set to increase by 4.1% to 2.9Mn, surpassing the pre-Covid-19 peak of 2.7Mn in 2019, while receipts will expand by 6.1%.
• The United States (U.S.) will drive this increase, as the U.S. typically accounts for around half of all tourist inflows. The strength of the U.S. dollar and solid, albeit slightly slower, economic growth in the U.S. will encourage US citizens to travel abroad. Non-US tourist arrivals will also expand as the government’s tourism diversification strategy starts to bear fruit.
• Remittances will also remain stable, contributing to a large secondary income surplus. Although a stronger increase in remittances will be prevented by slightly weaker economic growth in the US, remittances from the United Kingdom (UK) and Canada will increase as economic growth strengthens slightly in these economies.

(Source: Fitch Connect)

• The Panama Canal is exploring the construction of a pipeline to move liquefied petroleum gas (LPG) across the trade passage, canal administrator Ricaurte Vasquez said on Monday, with Japan seen as a top potential client for gas coming from the U.S.
• The canal, one of the world's busiest maritime trade passages, is looking to diversify its operations after getting the green light in a court ruling last year.
• "We're exploring the possibility of rolling out infrastructure with the capacity to move up to a million barrels per day (bpd), but the market is much larger," Vasquez told Reuters following a press conference. "Meeting the needs for growing volumes (of gas) through Panama is of the highest priority, but also of the highest complexity," Vasquez said.
• The move comes amid a backdrop of escalating tensions between the U.S. and Panama, sparked by U.S. President Donald Trump's claims about reclaiming the Panama Canal.
• Initial studies show that "possible traffic capacity through the Panama Canal could reach 2 million bpd (of LPG) in a decade," Vasquez added. The canal expects to make a decision about the pipeline in the next 12 months, Vasquez said.
• Investments of $8 billion in infrastructure and sustainability projects are already earmarked for the canal, spread out over the next decade.

(Source: Reuters)

• Venezuela's opposition has drafted a broad proposal for energy sector reform that would allow the participation of international companies in a bid to attract support from Big Oil and from the U.S. administration, according to sources and a summary of the proposal seen by Reuters.
• The re-election of U.S. President Donald Trump, whose administration this month cancelled a key license for U.S. oil major, Chevron, to operate in Venezuela citing President Nicolas Maduro's lack of electoral reforms, is seen by opposition leaders as an opportunity to ratchet up pressure on the leftist president.
• The proposed reform to Venezuela's hydrocarbon law sweetens previous plans presented by the opposition in recent years and may be attractive to international oil companies, including those in the United States.
• It includes shrinking the size of state oil company, PDVSA, while offering Venezuelan oil and gas fields, refineries and midstream assets to foreign companies. PDVSA's stakes would be open for private bidding.
• The reform proposal sets out plans to increase oil output above 3 million barrels per day (bpd), a level not seen in 15 years, according to a summary of the document seen by Reuters. The new proposal would also allow existing partners of PDVSA to shift to more attractive contract terms, which would include a lower take for the government.

(Source: Reuters)

• Britain did not immediately retaliate to U.S. President Donald Trump's tariffs on steel and aluminium imports on Wednesday, though Prime Minister Keir Starmer said he was disappointed by the move and that all options remained on the table. Trump imposed global tariffs of 25% on all imports of steel and aluminium, which he said would reorder global trade in favour of the United States.
• Britain had hoped to avoid tariffs on its steel sector, which is small but produces specialist products for defence and other industries. Trump said last month the two countries might reach a bilateral trade deal that would avert duties.
• The British government had argued its provision of key goods for the U.S. defence, oil and gas and construction sectors meant it should be given a carve-out. The EU responded to the U.S. tariffs by saying it would impose counter-tariffs on 26 billion euros ($28Bn) worth of U.S. goods from next month.
• A British official said on Tuesday the government would not impose retaliatory trade tariffs on the United States and focus instead on trying to secure an exemption. The head of the British steel trade body, UK Steel, questioned whether Trump realised Britain was an "ally, not a foe". "Our steel sector is not a threat to the U.S., but a partner to key customers, sharing the same values and objectives in addressing global overcapacity and tackling unfair trade," Director General Gareth Stace said.

(Source: Reuters)

• The U.S. budget deficit totalled $307 billion for President Donald Trump's first full month in office, up 4%, or $11 billion, from a year ago, the Treasury Department said on Wednesday, even as growth in receipts outpaced that of spending.
• Receipts totalled $296Bn in February, a record for that month. That figure was up 9%, or $25Bn, compared with a year earlier. However, outlays in February totalled $603Bn, which is also a record for that month. That was up 6%, or $36Bn, from the year-earlier period.
• After calendar adjustments for both receipts and outlays, the adjusted deficit would have been $311Bn, a 3% increase over the figure in February 2024, the Treasury Department said
• The deficit for the first five months of fiscal 2025 came to $1.147Tn, up 38%, or $318Bn, from a year earlier. Fiscal year-to-date receipts rose 2%, or $37 billion, to a record $1.893Tn, but outlays grew 13%, or $355Bn, to a record $3.039Tn.
• Driving the spending growth in February was higher spending on Treasury's interest on the public debt, outlays for Child Tax Credit payments and increased Social Security payments due in part to a 2.5% cost-of-living adjustment for 2025.

(Source: Reuters)

• Bank of Jamaica (BOJ) Governor Richard Byles has underscored the pivotal role of multilateral partnerships in driving the country’s economic achievements over the past 15 years.
• Notable collaborations with stakeholder interests such as the International Monetary Fund (IMF), World Bank, Centre for Latin American Monetary Studies (CEMLA), European Union (EU), Economic Commission for Latin America and the Caribbean (ECLAC), and the French Development Agency have been instrumental in providing funding, technical advice, and capacity-building programmes.
• Addressing members of the Diplomatic Corps at the Ministry of Foreign Affairs and Foreign Trade in downtown Kingston on Monday (March 10), Byles highlighted the significance of these partnerships in enhancing the stability of Jamaica’s financial system, implementing inflation targeting, macroeconomic modelling, financial market operations, and sector supervision.
• He also acknowledged the multifaceted bilateral support received from countries including the United States, China, Japan, the United Kingdom, France, Cuba, and South Africa. Their contributions have been critical in stimulating economic growth, strengthening resilience to shocks, improving governance, and advancing infrastructure development. Additionally, this support has fostered progress in health, trade, investment, education, and climate-change initiatives.
• Emphasizing the BOJ’s commitment to integrating climate-risk considerations into its supervisory framework, Byles noted Jamaica’s increasing vulnerability as a small Caribbean Island nation. The Central Bank has been actively publishing papers on climate-risk integration with grant support from the French Development Agency and plans to undertake its own climate-risk disclosures.
• Reaffirming the BOJ’s dedication to international economic cooperation, Byles welcomed continued dialogue with the diplomatic community. “We at Bank of Jamaica appreciate this kind of exchange to improve international economic cooperation and welcome continued dialogue as we work to overcome challenges and seize opportunities now and in the future,” he stated.

(Source: JSE)

• The matter of how much Venezuela should be compensated for its 49% shares in Petrojam, Jamaica’s state-owned oil refinery, is now in arbitration before the International Court of Justice (ICJ).
• Energy Minister Daryl Vaz provided the update last Friday as he responded to questions from Opposition Member of Parliament for Clarendon South-Western, Lothan Cousins, during the sitting of the Standing Finance Committee that examined the 2025/26 Budget.  Cousins wanted to know if Jamaica was prepared for an adverse ruling by the ICJ, which was asked to settle the matter in 2023 after Jamaica in 2019 moved to forcefully acquire the 49% stake held by Petróleos de Venezuela’s (PDVSA) in Petrojam.
• In February 2019, Prime Minister, Dr. Andrew Holness tabled a bill in Parliament for the compulsory acquisition of the shares. The bill provides for the: Ownership of the applicable property to be vested in the Accountant General, in trust for the Government; and for compensation, to be paid to persons having an interest in the applicable property, under specified rules.
• The bill’s “memorandum of objects and reasons” notes that the current ownership structure of Petrojam exposes the country to serious risks, which threatens its energy security and economic stability. “These risks have been exacerbated and made more imminent by sanctions imposed by third-party countries. As a result, a decision has been taken to enact legislation to provide for the compulsory acquisition of the shares held by the Petrojam Corporation of Jamaica,” the bill stated. The Government made the move out of concern that it could violate the United States’ sanctions imposed on the Maduro regime.
• Cousins highlighted that “The issue with Venezuela is live and it’s something that must be contemplated at all times because there may be an adverse ruling based on how things transpire”. Vaz responded noting that “The issue of the Venezuela shares is in litigation, and the good thing is that the Government of Jamaica put the share value in escrow so the bottom line is that there is no issue.”, notwithstanding he admitted that the funds being held in escrow are based on Jamaica’s valuation of the shares.
• Reports are that the Venezuelan Government is seeking US$85Mn. The ICJ is one of six ‘principal organs’¹ of the United Nations. It is the only international court that adjudicates general disputes between nations. It often takes years before arriving at a ruling.

(Source: CariCris)

^[1] A "principal organ" refers to one of the main governing bodies within an organization, particularly in the context of the United Nations, where it signifies the six key organs that are established by the UN Charter.

• Mexico's economy appears on track to contract in the first quarter, entering a technical recession, according to analysts, as U.S. President Donald Trump’s on-again, off-again tariffs wreak havoc on growth that was already weakening.
• During the final months of 2024, Mexico had its first quarterly GDP slump since the pandemic. A first-quarter contraction would mark a technical recession, defined as two straight quarters of negative growth. Trump's tariff threats pile pain on Mexico after a devastating drought last year. Investors were also worried about a controversial judicial overhaul and unchecked congressional power of the ruling Morena party.
• A technical recession would likely reignite pressure for a fiscal reform. Sheinbaum has said Mexico does not need significant reform, even as she wrestles with how to maintain current levels of welfare while the economy sputters.
• Last week, Trump imposed 25.0% tariffs on all imports from Mexico and Canada, then offered a month-long reprieve on goods that comply with the USMCA, a regional trade agreement. Sheinbaum has said she expects exports under the USMCA to remain exempt from tariffs. Around half of Mexican exports to the U.S. are USMCA-compliant and the government aims to boost that to between 85.0% and 90.0%, according to Economy Minister Marcelo Ebrard.
• Mexico’s GDP contracted at a seasonally adjusted 0.6% rate in the fourth quarter and full-year growth was 1.2%, reflecting a worsening economic picture even before Trump's arrival. In February, Mexico's central bank halved its forecast for 2025 GDP growth to 0.6% from a previous 1.2%, although the Finance Ministry has maintained its forecast of 2% to 3% growth.
• The outlook on tariffs remained unclear. Trump's frequent shifts on tariffs have exasperated negotiating teams in Mexico and Canada, leaving businesses in limbo. Economists that participate in Reuters surveys have warned of an increased risk of recession for the U.S., Mexico and Canada given the uncertain future of USMCA.

(Source: Reuters)

• Industrial production in Brazil remained unchanged in January from December, government statistics agency IBGE said on Tuesday, undershooting market forecasts as indicators continue to signal a slowdown in the local economy.
• The January figure follows three consecutive months of negative readings as Brazil's industry grapples with high interest rates, with the sector having lost steam in recent months despite an overall strong 2024. Economists polled by Reuters expected a 0.5% month-on-month expansion in January.
• Production rose in three of the four main categories surveyed by IBGE, with capital goods standing out after drops in the previous two months, but a fall in intermediate goods output weighed on the overall index.
• Industrial production in January grew 1.4% on a yearly basis. But markets expected a 2.3% expansion, according to the Reuters poll.
• Brazil's benchmark interest rate currently stands at 13.25% and the central bank has already pencilled in an additional hike of 100 basis points for its meeting later this month as it seeks to tame rising inflation. Policymakers have closely watched moderation signs but noted that it was still too early to establish a clear slowdown trend.

(Source: Reuters)