• A leading economist has sounded an alarm over what he has described as a significant decline in domestic investment and a stall in the renewable energy thrust that could threaten Barbados’ economic development in the new year.
• Professor of Economics Justin Robinson has suggested that the government find a way to treat these issues as a matter of urgency if it is to effectively manage the national debt. He identified these issues as the primary challenges facing the government in 2023 and likely to persist into 2024.
• Regarding the decline in project financing by local investors, he noted the government’s heavy reliance on borrowing money, deeming it a risky practice. The university academic highlighted the challenge of financing the rollover of government debt, pointing out that the absence of substantial investments by domestic investors requires foreign borrowing to meet financial needs.
•  “Domestic investments was better than the previous year, but the amount of financing that was provided by domestic investors was still small compared to historic trends, which meant that the government again had to substitute, and engage in foreign borrowing to meet its financing needs. So, think of it in two parts: there is a deficit for the year which it has to finance, but then also the debt that is maturing.”
• That being said, the economist commended the government’s management of public finances, which is reflected in solid primary surpluses, reduced deficits, and debt-to-GDP ratios. Despite positive indicators, he noted the scepticism among domestic investors, emphasising the need for a balance between foreign and domestic financing to address concerns about foreign exchange.

(Source: CariCris)

• Higher consumer spending over the holiday season, real wage gains over the last nine months, and a jump in consumer confidence point to a good start for 2024, said Jared Bernstein, chair of the White House Council of Economic Advisers.
• U.S. consumer confidence increased to a five-month high in December, mirroring a nearly 14% increase in the University of Michigan's benchmark Consumer Sentiment Index, its biggest jump in more than three decades. Of note, for most of Biden's term, the Michigan index has reflected widespread pessimism about the economy among households. Still, the new data showed Americans' growing confidence that inflation was finally trending lower.
• Michigan survey director Joanne Hsu noted the upswing in December reversed "all declines from the previous four months. These trends are rooted in substantial improvements in how consumers view the trajectory of inflation."
• Indeed, inflation has eased substantially over the course of 2023. The Labor Department's Consumer Price Index began the year with annual price increases averaging 6.4%. By November, that was down to 3.1%.
• Despite the growing optimism, the Biden administration says it remains alert to geopolitical risks, including Russia's ongoing war in Ukraine, which has the potential to disrupt grain markets and push up inflation again. In the Middle East, Israel predicts its war with Hamas militants will last for months, increasing the risk of regional escalation. In the Red Sea, attacks by Iranian-backed Houthi militants in Yemen have disrupted world trade.

(Source: Reuters)

• China's manufacturing activity shrank for a third straight month in December and weakened more than expected, clouding the outlook for the country's economic recovery and raising the case for fresh stimulus measures in the new year.
• The government has, in recent months, introduced a series of policies to shore up a feeble post-pandemic recovery, which is being held back by a severe property slump, local government debt risks, and soft global demand. But the world's second-largest economy is still struggling to gain traction.
• China's central bank said it would step up policy adjustments to support the economy and promote a rebound in prices amid signs of rising deflationary pressures. Notably, China's consumer prices fell the fastest in three years in November, while factory-gate deflation deepened, weighed by weak domestic demand.
•  Weak external demand also remained a major drag on factory activity, with new export orders index registering 45.8 in December, contracting for the ninth straight month. The sub-index of factory gate prices was at 47.7, contracting for a third straight month, adding to signs of deflation and pressure on business profits.
• The official non-manufacturing purchasing managers' index (PMI), which includes services and construction, rose to 50.4 from 50.2 in November, supported by a recovery in the vast services sector.

(Source: Reuters)

• For November 2023, output prices for producers in the Mining and Quarrying industry increased by 0.4%, while those for the Manufacturing industry declined by 0.7%, according to yesterday’s release from the Statistical Institute of Jamaica (STATIN).
• The rise in the index for the major group ‘Bauxite and Alumina Processing’ accounted for the increase in the index for the Mining and Quarrying industry.
• For the Manufacturing industry, the reduction in the industry’s index was due mainly to a 4.0% decline in the index for ‘Refined Petroleum Products’ as fuel prices on the international market declined amid concerns over the projections for weaker economic growth in 2024. The overall reduction in the industry’s index was tempered by a 0.2% rise in the index for ‘Food, Beverages and Tobacco’.
• With November’s outturn, the index for the Mining & Quarrying industry has risen by 4.7% for the period November 2022 to November 2023.
• Over the same period, the point-to-point index for the Manufacturing industry increased by 2.1%. The major groups ‘Food, Beverages & Tobacco (2.3%)’. ‘Refined Petroleum Products’ (2.6%) and ‘Other Manufacturing n.e.c’ (10.1%) were the primary contributors to the movement. However, these increases were moderated by a decline of 4.3% in the index for the major group ‘Fabricated Metal Products excluding Machinery & Equipment’.
• The Producer Price Index (PPI) is a significant economic indicator that tracks the average fluctuation in selling prices that domestic producers of goods and services experience over time.

(Source: STATIN)

• The Economic Commission for Latin America and the Caribbean (ECLAC) now estimates a 39.2% increase in Guyana’s economic growth this year, a figure higher than its earlier projection.
• Guyana should see massive economic expansion continue this year, largely due to developments in the country’s nascent oil and gas sector. The 39.2% growth rate forecast is the highest in the region. In April 2023, ECLAC estimated that Guyana’s 2023 growth rate would be about 37.2%. This new forecast is therefore higher by 2 percentage points. For 2024, ECLAC forecasts a 28.9% growth rate for Guyana.
• That being said, sans Guyana, Latin America and the Caribbean (LAC) region remains on a “low-growth path.” The LAC region should only experience a 2.2% growth in real Gross Domestic Product (GDP). Notably, if that 2.2% figure is disaggregated by sub-regions, the Caribbean, excluding Guyana, should record an increase of 3.4% (compared to 6.4% in 2022).
• If Guyana’s growth is factored into the Caribbean’s overall growth rate, the region should see a 9.4% GDP increase this year.
• Meanwhile, South America is forecast to register an increase of 1.5% (compared to 3.8% in 2022), while Central America and Mexico should record a 3.5% growth rate (compared to 4.1% in 2022). Furthermore, the ECLAC noted that the slow regional growth should be accompanied by a slowdown in job creation.  

(Sources: CariCris & ECLAC -Preliminary Overview of the Economies of Latin America and the Caribbean)

• Mexican and U.S. officials agreed to keep border crossings open, Mexican President Andres Manuel Lopez Obrador said on Thursday, December 28, following a visit by U.S. Secretary of State Antony Blinken that focused on securing Mexico's help to stem record-high migration.
• The United States earlier this month temporarily shuttered several crossings, including two key rail bridges, to redeploy enforcement resources elsewhere across the border amid soaring migrant numbers, a pivotal issue in next year's U.S. elections.
• Lopez Obrador said Wednesday's meetings with the U.S. delegation, which included Blinken and Homeland Security Secretary Alejandro Mayorkas, were "direct," and he praised the Biden administration's relationship with Mexico.
• Lopez Obrador earlier this month said he would help the United States by boosting measures to curb migration without giving details. U.S. and Mexican officials have not released any more information about possible agreements reached during the meeting.

 (Source: Reuters)

• The Organization of the Petroleum Exporting Countries (OPEC) is facing weakening demand for its crude in the first half of 2024, just as its global market share declines to the lowest since the Covid-19 pandemic on the back of output cuts and member Angola's exit, according to Reuters calculations and data from forecasters.
• The trend means the group would struggle to ease production cuts unless global oil demand accelerates or OPEC is prepared to accept lower oil prices.
• Angola said it is leaving OPEC from January 2024, following exits by Ecuador in 2020, Qatar in 2019 and Indonesia in 2016. Angola's departure will leave the group with 12 members and take its production below 27 million barrels per day (bpd) - less than 27% of the total global supply of 102 million bpd.
• The last time OPEC's market share fell to 27% was during the 2020 pandemic, when global demand dropped by 15-20%. Since then, global demand has recovered to record levels, meaning OPEC has lost market share to rivals. As of November 2023, OPEC's crude oil output accounted for 27.4% of the total market, down from 32-33% in 2017-2018, according to figures from the group's monthly reports.
• The Energy Information Administration sees demand for OPEC crude falling in the second quarter from the first, based on a Reuters calculation. The Energy Information Administration sees demand for OPEC crude holding steady, while OPEC also sees it falling, albeit from a higher level than the other two forecasters.

(Source: Reuters)

• The number of Americans filing initial claims for unemployment benefits rose last week, indicating the labor market continues to cool in the fourth quarter.
• New state unemployment benefit claims rose by 12,000 last week to 218,000, according to the Labor Department. A Reuters poll showed economists expected an increase to 210,000 initial claims for the week ended Dec. 23.
• The rolls of those receiving benefits after one week of aid rose 14,000 from the week prior, reaching 1.875 million. Continued unemployment claims, a measure for hiring, have increased since mid-September, indicating those already out of work may be having difficulties getting a job.
• In November's economy, 199,000 new jobs emerged, up from 150,000 in October, according to the Labor Department's non-farm payrolls report. The unemployment rate also fell moderately from the month prior, to 3.7% from 3.9%.
• Amid slower job growth and milder inflation, the Federal Reserve has left its benchmark interest rate unchanged for three consecutive policy meetings, and economists expect its hike campaign to be at an end.

(Source: Reuters)

• Minister of Finance Dr. Nigel Clarke, says the government is moving to begin regulating virtual assets such as cryptocurrencies. This is in keeping with the recommendations of global financial watchdog, the Financial Action Task Force (FATF), in relation to Jamaica’s compliance with the anti-money laundering and combating the financing of terrorism (AML/CFT) regulations.
• Clarke explains that as the technologies surrounding virtual assets advance, so too must Jamaica’s financial regulation. He further stated, “Since Jamaica’s framework has to date not specifically addressed the risk caused by virtual asset providers, Jamaica’s rating was downgraded from compliant to partially compliant.”
• “This is a process that is always ongoing and we have to keep the fabric of our regulation in step with the advancements of the world and new technologies that can allow for the abuse of procedures and laws,” he stated. Dr. Clarke further adds that the Financial Services Commission FSC, the current regulator for this sector, is spearheading the work to develop draft regulations for virtual assets.
• Overall, Jamaica has made major strides in achieving compliance with the AML/CFT of the FATF. There are 40 FATF recommendations that determine a country’s capacity to combat the risk posed by criminals to launder proceeds of crime and finance terrorism. The government recently applied for a rerating of Jamaica’s compliance with the 40 FTAF recommendations and received an improved report.
• The report concluded that Jamaica was either fully or partially compliant with 37 of the 40 FATF recommendations. This marks a significant improvement compared to a 2015 assessment that concluded Jamaica was compliant or largely compliant with only 17 of the 40 FATF recommendations.

(Source: JIS)

• The Inter-American Development Bank (IDB) has approved a US$90Mn Conditional Credit Line for Investment Projects, which includes a first individual loan of US$42Mn, to facilitate the digital transformation of Trinidad and Tobago by supporting the expansion and enhancement of the digital economy.
• This programme represents a product that has been borne from over two years of very close collaboration between the IDB and the Ministry of Digital Transformation,' IDB's executive director for the Caribbean Constituency Robert Le Hunte stated.
• The programme has three components. The first will improve the institutional framework for digital innovation by developing the State's capacity to design and implement digital strategies at the national level and improve citizen-facing digital service delivery within key government agencies.
• The second will accelerate the growth of the digital economy through the strengthening of actors central to the digital innovation ecosystem, such as training providers, firms, and entrepreneurs.
• The third will strengthen national cybersecurity capabilities by financing the modernisation of cybersecurity public policy, regulations, standards, and protocols, among other actions.
• Some benefits of this programme include selected government agencies receiving institutional strengthening support to advance their use of data interoperability platforms and cybersecurity management. Over 150 firms will receive support to use digital technology to improve their productivity, and more than 500 public servants will have access to advanced training opportunities in digital service delivery and project management.

 (Sources: CariCris & Inter-American Development Bank)