• Fitch Solutions has revised its 2023 forecast for Panamanian real GDP growth from 5.0% to 6.0%, which follows a 10.8% print in 2022. Fitch noted that it sees growth easing further to 3.0% in 2024.
• Growth will be underpinned by the government’s move to ramp up spending ahead of next year’s elections, helping to offset the drag from the drought that has impacted the Panama Canal and higher interest rates.
• Of note, Panama’s monthly activity indicator suggests that the economy has held up better than expected over H123, with growth seemingly having averaged around 9.0% y-o-y. However, Fitch expressed that no official GDP data for 2023 was available as of October 16.
• That being said, the monthly figures which are available are broadly consistent with comments from Minister of the Economy and Finance Héctor Alexander, who suggested in late September that the economy had grown by around 8.0% in the first half of the year.
• However, risks to Fitch’s forecasts are large and are related to data availability issues which make it very difficult to forecast with any real degree of accuracy.

(Source: Fitch Solutions)

• Builder confidence in the market for single-family homes has dropped to the lowest level since January, largely due to the prevailing high mortgage rates and financing costs.
• Mortgage rates have reached a 23-year high, surpassing 7% for the 30-year fixed mortgage. This has significantly reduced affordability and affected buyer traffic, particularly younger buyers who are increasingly being priced out of the market.
• The National Association of Home Builders/Wells Fargo Housing Market Index declined by 4 points to 40 in October, marking the third consecutive monthly decline in builder confidence. The index components for current sales conditions, sales expectations, and buyer traffic have all shown notable drops.
• Builders are employing various incentives to attract buyers, including buying down mortgage interest rates. Additionally, some builders have reduced home prices to entice buyers. However, to address the housing affordability crisis, it is emphasized that adding affordable supply through increased housing production is crucial, but uncertainties in monetary policy are contributing to market challenges.

(Source: CNBC)

• Oil prices experienced a slight increase on Tuesday, with Brent crude futures settling up by 25 cents to $89.90 a barrel, while U.S. West Texas Intermediate crude (WTI) remained unchanged at $86.66 a barrel.
• Investors are closely monitoring U.S. diplomatic efforts and President Joe Biden's visit to Israel to gauge whether these actions will help prevent the Middle East conflict from escalating further. The uncertainty surrounding this situation has affected oil prices.
• Concerns were raised earlier in the session when Thomas Barkin, chief of the Richmond Federal Reserve Bank, noted that higher long-term U.S. borrowing costs could exert downward pressure on oil demand. Interest rate hikes aimed at curbing inflation may slow economic growth and subsequently reduce the oil demand.
• Oil prices had previously surged due to fears that the Israel-Hamas conflict might escalate and potentially impact the oil-producing region. Both Brent crude and West Texas Intermediate crude rallied last week, with Brent gaining 7.5%, marking its largest weekly gain since February. Biden's upcoming visit to Israel aims to strike a balance between showing support for Israel's actions against Hamas and rallying Arab states to prevent a broader regional conflict, particularly considering potential ramifications for oil markets.

(Source: Reuters)

• Knutsford Express Services Limited (KEX) recorded a net profit of $86.18Mn for the first quarter that ended August 30, 2023. This represents a 2.3% increase in profitability when compared to the $84.23Mn recorded over a similar period in 2022.
• Revenue for the quarter was up by 18.5% to $491.79Mn, from the $415.09Mn recorded over the same period of last year. This was driven by continued strong demand for its suite of services, including passenger service which was supported by increased arrivals documented at the airports. Similarly, there has been strong demand by members of the public, both individuals and businesses alike, for courier services.
• Administrative expenses for the quarter increased by 25.6% to $380.34Mn, which can be attributed to the expanded workforce which the company found necessary to meet customer demands. As a result of the increase in admin expenses which outpaced revenue growth, operating profit was down by 0.6% from $112.15Mn in 2022.
• KEX’s stock price has increased by 24.8% since the start of the calendar year. The stock closed Friday’s trading session at $11.09 and currently trades at a P/E of 18.1x which is above the Junior Market Other Sector Average of 16.0x.
• In the current financial year, KEX plans to bolster its fleet by deploying two (2) double-decker premium coaches into operation. Furthermore, another three (3) coaches will commence service by the end of Q3 of the current financial year to support growth and enhance customer experience.

(Source: JSE)

• Tourism Minister Edmund Bartlett has renewed his call for the establishment of a global resilience fund to aid in boosting tourism.
• Mr Bartlett said the initiative would encourage tourists to take personal responsibility for bolstering the ability to respond, mitigate, adapt, and recover from the impacts of climate-related shocks.
• He was addressing the joint 5th Urban Economy Forum and 59th ISOCARP World Planning Congress which ended on Thursday.
• Bartlett said it is important for Small Island Developing States, including Jamaica, to receive international support in their efforts to build resilience and pursue sustainable development in the face of these extraordinary challenges.
• The proposed fund would offer support to tourist-dependent destinations by helping these countries to respond to their own crises and disasters. Each country would manage its own tourism resilience fund and employ the resources to enforce its tourism resilience, thus guaranteeing the sustainability of international travel and tourism.

(Source: RJR News)

• Tourism Minister David Collado affirmed last Thursday, October 12, 2023, that tourism maintains “unstoppable growth” by registering the arrival of 545,990 visitors last month, thus reaching the historic figure of 7,625,986 in the January-September period.
• “Those are historic numbers, which are felt in the economy, and the best of all is that this growth is unstoppable,” he said when presenting the statistics for September during an event held at the Ambassador Hall
• In September, by air alone, 478,794 tourists entered the country, representing 48% more than the same month in 2019, 31% more than in 2021, and 11% more than in 2022.
• Furthermore, sustainable growth was also reflected in the cruise industry. The minister further noted that the country received 67,196 cruise passengers in September, totalling 1,602,411.
• Projections for tourist arrivals at the end of the year are expected to exceed 7.9 million, which would be a new record. Minister David Collado reiterated that by the end of 2023, the Dominican Republic will surpass the goal of 10 million tourists.

(Source: Dominican Today)

• Expected economic activity prints in Latin American (LATAM) countries give a better picture of regional growth as well as the timing and pace of interest rate cuts. 
• For Colombia, high-frequency data (industrial production and real retail sales growth remained in negative territory) suggesting that the economy would have likely weakened significantly in August – possibly falling into contraction. This supports Fitch’s view that the central bank is likely to start its rate-cutting cycle in its next meeting at the end of October.
• Peru is likely to see continued weakness in H223 due to the effects of El Nino on fishing and agricultural output as well as weak external demand for copper, their main commodity export. Given this, Fitch also expects that Peru’s central bank will continue with its rate-cutting cycle.
• For Mexico, industrial activity remained strong in August, with output rising by 0.3% m-o-m relative to the 0.5% expansion seen in July. This was enough to push the y-o-y rate up to a nine-month high of 5.2%. In line with Fitch’s expectations, growth was driven by strength in the construction sector, while activity in the manufacturing sector eased somewhat. Given this, Fitch maintains the view that cuts will not materialise until mid-2024, largely owing to the resilience of the Mexican economy which will cause price growth to remain sticky.
• Finally, while Brazil has continued to beat expectations, the effect of high credit costs is likely to weaken this resilience. That said Fitch maintains its view that the bank will continue with its cautious rate-cutting cycle through 2023 into 2024.
• Overall, economic activity is expected to vary across LATAM countries which could have the effect of varying interest rate projections for 2023 and 2024.

(Source: Fitch Solutions)

• The global financial landscape faces several pressing concerns, including escalating debts, soaring interest rates, climate change costs, health and pension expenditures tied to ageing populations, and divisive political climates. Developed economies are particularly at risk, with over 80% of the $10 trillion increase in global debt concentrated in these regions, reaching a record $307 trillion. Notably, the United States, Italy, and Britain are raising significant worries.
• Investors are increasingly cautious due to heightened government borrowing costs, prompting a reevaluation of long-term bond investments. Experts stress the need for governments to establish credible fiscal plans, increase taxes, and stimulate growth to manage their finances effectively. Geopolitical tensions and a fragile economic environment, combined with shrinking central bank support and higher interest rates, amplify the risk of a policy misstep triggering a market downturn.
• Former chief economist at the European Central Bank, Peter Praet, underscores the vulnerability of public finances in many countries, emphasising the potential for a public finances crisis without corrective actions. The trajectory of government debt poses a substantial threat to both macroeconomic and financial stability, as observed in the United States' declining credit rating due to budget disputes.
• Italy's considerable debt, totalling 2.4 trillion euros, is a focal point in Europe, heightening concerns about vulnerability to crisis. The risk of losing investment-grade ratings and its potential impact on southern Europe looms large. Additionally, stagnant growth across Europe and Britain raises doubts about debt sustainability, particularly if a brighter growth outlook is not achieved.
• Various countries, including the United States, Britain, and Italy, grapple with burgeoning interest payments as rates rise, adding to fiscal pressures. Projections indicate a significant increase in interest costs as a percentage of GDP in the coming decades, underscoring the urgency of addressing these financial challenges.

(Source: Reuters)

• Israel is gearing up for a potentially prolonged conflict with significant humanitarian implications. Hamas militants initiated a surprise terrorist attack, prompting the Israeli defence forces to call up over 300,000 reservists, an unprecedented move in recent history.
• Israel's standing army, air force, and navy consist of 150,000 members, while the reserve force comprises about 450,000 members, bringing diverse skills and experience to the military. Reservists come from various sectors, including education, technology, entrepreneurship, agriculture, law, healthcare, tourism, and manufacturing.
• The economic impact will hinge on how long reservists are away from their civilian jobs in a country with a population of over 9 million and a GDP of $521.69 billion. Immediate effects include a drop in tourism, but a potential surge once the conflict subsides due to pent-up demand.
• Certain employment sectors, heavily staffed with foreign workers, are expected to continue operations during the war, minimizing disruption. This includes the chemical sector, a major source of Israel's exports, and the Potash industry in the Dead Sea region, easing concerns about potash supply.
• The main Israeli stock index has seen a 6% decline this week, reflecting market concerns related to the ongoing conflict. No new warnings from rating agencies regarding Israel's debt have emerged, though prior concerns existed due to political instability and proposed judicial reforms.
• Despite the challenging situation, there is optimism that Israel will ultimately achieve a military victory, potentially leading to an improved country and economy. The prolonged instability in the Gaza region may find a resolution through this conflict, bolstering confidence in the long-term stability of the area.

(Source: CNBC)

• The International Monetary Fund (IMF) has downgraded its growth outlook for Jamaica. In its latest economic outlook released Tuesday morning, the IMF predicted that the local economy is set to grow by 2% by the end of 2023 down from 2.2% previously.
• The IMF also projected slower growth for 2024 at 1.8%, a 0.2% downward revision.
• The forecast for 2028 remains at 1.6%. The IMF's forecast comes days after the World Bank upgraded its outlook for Jamaica, with expected growth for this year at 2.3%. 
• Meanwhile, for the Latin America and Caribbean Region, the IMF upgraded its GDP outlook to 2.3% growth which is higher than the projection for the year made in April of 1.6%.
• The IMF says the region's GDP will also grow by 2.3% next year, reflecting a 0.1% improvement in the outlook.
• The deceleration comes at a time when the world has yet to fully mend from a devastating but short-lived COVID-19 recession in 2020 and now could see fallout from the Middle East conflict — particularly to oil prices.

(Source: IMF)