• As labour shortages continue to affect all sectors across Guyana, a recent Investment Climate Report released by the United States (US) State Department has found that the country has a major informal economy that accounts for between 30 and 50 per cent of the job market.
• According to the report, the major informal economy was partly due to many Guyanese pursuing self-employment in unregulated jobs. Additionally, businesses continue to report significant challenges in staff recruitment and retention.
• Noting that the private sector has repeatedly called for immigration reform to increase the supply of skilled labour, the US report said companies entering Guyana should consider training and capacity-building opportunities for their employees.
• It was further documented that Guyana’s labour market is tightening due to high investments in the oil and gas sector. Moreover, the Local Content Act “creates pressure on an already tight labour market by offering legal protections and incentives for Guyanese companies to service the oil and gas sector, fueling the flight of labour and investment to the industry and raising the risk of the resource curse.”
• It also found that Guyana’s brain drain was evident, noting that “at 89 per cent, Guyana has one of the highest emigration rates in the world for nationals with a university degree.” Notably, professionals like nurses and teachers were found to be emigrating in high numbers. Nevertheless, it has recognized efforts being employed by the Government to address the situation.

(Source: iNews Guyana)

• Federal Reserve efforts to overhaul a key emergency lending facility historically viewed with anxiety by banks are now being joined by potential congressional action. On Friday, Democratic Senator Mark Warner introduced legislation, to overhaul the Fed's discount window, a long-running tool that provides fast, collateralized loans to deposit-taking banks.
• Despite the Fed working to make sure banks are ready and willing to use the discount window, banks have long shunned it, fearing that using it will send a signal of distress to their peers. That long-standing stigma stood out in March 2023 when several banks ran into trouble and spurred fears about the overall state of the banking system.
• Since then, Fed officials have been seeking to make sure banks are prepared to use the discount window and have signalled some confidence their efforts are working. Warner's bill could bolster that as it would mandate all, but the smallest banks, to test their discount window access and require regulators to reflect banks' ability to use the facility when evaluating their liquidity.
• The discount window "has deficiencies that have led to severe stigma, increasing the risk of banking panics and deposit runs," former New York Fed President William Dudley said in Warner's statement announcing the bill. "This bill will provide a good basis for regulators to implement operational improvements and reduce frictions that hinder the effectiveness of [the] discount window."
• Earlier this month, Dallas Fed President Lorie Logan said more than 5,000 deposit-taking banks did the paperwork needed to access the discount window, with banks having pledged $3 trillion in collateral for potential loans, up from $1 trillion last year.

 (Source: Reuters)

• Optimism about global growth prospects this year and next is building among hundreds of economists polled by Reuters. Risks are still tilted toward higher inflation, even as they cling to their forecasts for interest rate cuts.
• While most major central banks successfully tamed sky-rocketing inflation rates with rapid rate hikes last year, a resilient global economy with strong employment and wage growth has kept risks of a price pressure resurgence alive.
• A 56% majority of the economists (114 of 202) that participated in a global poll covering nearly 50 top economies said inflation was more likely to be higher than they forecast for the remainder of the year than lower. So too with rates.
• The global economy was forecast to grow 3.1% in 2024 and 2025, an upgrade from the 2.9% and 3.0% forecast in an April poll, roughly aligning with the International Monetary Fund's latest prediction.
• Growth rates for 24 of the 48 top economies surveyed were upgraded from three months ago. 13 of the 24 were developed economies, where there were concerns about flagging demand while the remaining were 11 in emerging economies.
• 18 economies saw a downgrade and 6 were left unchanged. Still, according to the survey, economists expect the U.S. Fed, and the Bank of England, to cut rates twice this year and the European Central Bank thrice.

 (Source: Reuters)

• According to data on the Producer Price Index (PPI) released by the Statistical Institute of Jamaica (STATIN), output prices in the Mining and Quarrying industry increased by 0.6% for June 2024 due to a similar 0.6% increase in the index for the major group ‘Bauxite Mining & Alumina Processing’.
• For the Manufacturing industry, there were gains in the major groups: 'Food, Beverages & Tobacco' saw a 1.2% rise, 'Chemical and Chemical Products' went up by 0.6%, and 'Paper and Paper Products' increased by 1.5%. However, these were offset by a 1.1% decline in the index for 'Refined Petroleum Products', which resulted in an over gain in the index for the Manufacturing industry of 0.6%.
• Despite the June 2024 increase in the index, the point-to-point index for the Mining & Quarrying industry declined by 2.9%. This was a result of a 3.2% fall in the index for the major group ‘Bauxite Mining & Alumina Processing’.
• The point-to-point index for the Manufacturing industry increased by 3.4%. Increases in the major groups 'Refined Petroleum Products' (10.8%) and 'Food, Beverages & Tobacco' (2.6%) contributed to this upward movement.
• Geopolitical tensions in Europe and the Middle East could disrupt oil prices and supply chains, raising producer costs. However, the global shift to renewables and increased oil production, especially by the US, might lower demand and prices. Additionally, OPEC+ plans to unwind voluntary cuts sooner than expected, raising concerns about market absorption in 2025.
• 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 experienced over time. Currently, the industries being tracked are Manufacturing Industry and Mining and Quarrying.

(Sources: STATIN & NCBCM Research)

• The Government of Jamaica has moved to provide temporary relief from customs duty and General Consumption Tax (GCT) on goods imported for rehabilitation works linked to Hurricane Beryl. The relief will run from July 4 to August 23
• The Ministry of Finance and Planning noted that the move arose from the activation of the Disaster Risk Management Act and the impact of Hurricane Beryl on Jamaica.
• The Minister of Finance and the Public Service approved goods, which the Commissioner of Customs is satisfied are being imported for relief and rehabilitation, to be relieved of import duty and general consumption tax.
• This is in accordance with 30B of the Second Schedule to the CustomsTariff and section 47 of the GCT Act.
• These suggest that the Minister has the authority to waive, remit, or refund all or part of the tax payable under this Act to a person liable for tax, upon receiving a written application from them. This can be done if the Minister deems it justifiable in the given circumstances. Any such waiver, remission, or refund may be conditional upon terms and conditions the Minister considers appropriate.
• Beryl became the earliest storm to develop into a Category 5 hurricane in the Atlantic and peaked at winds of 165 mph (270 kph). It weakened to a still-destructive Category 4, with maximum sustained winds of 150 mph, just hours before impacting Jamaica on Wednesday, July 3, 2024.

 (Source: Caribbean National Weekly)

• Consumer price inflation (CPI) in Barbados will fall to an estimated average of 3.9% in 2024 and 3.0% in 2025, owing mainly to stabilising commodity prices says Fitch Solutions. This forecast is down significantly from average price growth of 5.0% in both 2022 and 2023.
• Slowing inflation will provide support to real household incomes, private consumption, and wider economic growth in Barbados. Real GDP growth is forecasted to grow by 3.1% in 2024 and 2.1% in 2025.
• That said, despite accelerating consumer spending due to the impacts of a robust tourism sector and recovering real incomes, core inflation will be kept in check by government fiscal austerity efforts, which are in line with International Monetary Fund (IMF) loan conditions.
• However, risks to price growth are tilted to the upside, with the potential for any commodity-price driven shock to push up inflation and slow Barbados’ economic recovery. As an island economy, Barbados imports 95% of its energy (mainly hydrocarbons) and around 85% of its food from abroad and is therefore highly exposed to the global rise in commodity prices.

(Source: Fitch Solutions)

• Consumer prices in Brazil rose more than expected in the month to mid-July on higher transportation costs, official data showed on Thursday, July 24, likely sealing the deal for the central bank to keep interest rates on hold at a policy meeting next week.
• Prices, as measured by the IPCA-15 index, were up 0.30% in the period, statistics agency IBGE (Brazilian Institute of Geography and Statistics) said, slowing from 0.39% in the previous month but overshooting the 0.23% increase forecast by economists polled by Reuters.
• In the 12 months to mid-July, inflation in Latin America's largest economy stood at 4.45%, up from 4.06% the month before and exceeding the 4.38% expected by economists in the Reuters poll.
• Jason Tuvey, an economist at Capital Economics, said that coming alongside fiscal concerns and recent weakness of the Brazilian real, the latest inflation data backed a view that the central bank will not resume rate cuts this year.
• Brazil's central bank targets inflation at 3%, plus or minus 1.5 percentage points. Last month, the monetary authority unanimously halted a rate-cutting cycle, citing higher inflation expectations and fiscal struggles.
• The next decision is scheduled for July 31, and markets believe the bank will maintain its key rate at 10.50%.

 (Source: Reuters)

• The U.S. economy grew faster than expected in the second quarter, but inflation subsided, leaving intact expectations of a September interest rate cut from the Federal Reserve.
• Gross domestic product increased at a 2.8% annualized rate last quarter, the Commerce Department's Bureau of Economic Analysis said in its advance estimate of second-quarter GDP on Thursday. Economists polled by Reuters had forecast GDP rising at a 2.0% rate. Estimates ranged from a 1.1% rate to a 3.4% pace. The economy grew at a 1.4% rate in the first quarter.
• The economy, which continues to outperform its global peers despite hefty rate hikes from the Fed in 2022 and 2023, remains supported by a resilient labor market even as the unemployment rate has risen to a 2-1/2-year high of 4.1%.
• The personal consumption expenditures (PCE) price index, excluding the volatile food and energy components, increased at a 2.9% rate after surging at a 3.7% pace in the first quarter, welcome news for U.S. central bank officials ahead of their two-day policy meeting next week.
• The Fed has maintained its benchmark overnight interest rate in the current 5.25%-5.50% range for the past year. It has hiked its policy rate by 525 basis points since 2022. Financial markets expect three rate cuts this year, starting in September.
• Despite the solid economic growth pace, the outlook for the second half of the year is hazy. The labour market is slowing, which will have an impact on wage gains.

 (Source: Reuters)

• British business activity picked up this month after a lull in the run-up to a July 4 election, bolstered by the fastest manufacturing growth in two years and the strongest inflow of new orders since April 2023.
• The figures may cheer Prime Minister Keir Starmer's new government - which is targeting faster growth to allow higher public spending - and the Bank of England too, as inflation pressures fell to their lowest in more than three years.
• Although growth so far this year has exceeded most forecasters' expectations, Britain's economy has performed relatively poorly since the COVID-19 pandemic. Among the Group of Seven rich economies, only Germany has done worse, as it took an even bigger hit than Britain from the surge in European natural gas prices, which followed Russia's full-scale invasion of Ukraine in 2022.
• There were, however, positives in July's S&P Global Flash Composite Purchasing Managers' Index as it rose to 52.7 from June's six-month low of 52.3, a shade higher than the 52.6 forecast in a Reuters poll of economists. The result was also stronger than the same survey for the eurozone, which fell to 50.1 from 50.9, below all economists' forecasts and within a whisker of recessionary territory.
• However, consultancy Capital Economics estimated that the PMI reading was only consistent with a quarterly growth rate of 0.2% in July, below the robust pace of 0.6%-0.7%, which they forecast for the three months to the end of June.
• Britain's economy grew just 0.1% last year. The International Monetary Fund forecasts 0.7% growth for 2024. The BoE will publish new inflation forecasts on Aug. 1, but investors have scaled back bets that it will cut interest rates from their 16-year high of 5.25% after data last week showed services price inflation and wage growth remained high.

(Source: Reuters)

• The Government plans to tap $5Bn from its disaster risk financing resources to address the immediate relief and recovery efforts related to Hurricane Beryl.
• Minister of Finance and the Public Service, Dr. the Hon. Nigel Clarke, made the disclosure during a Statement to the House of Representatives on Tuesday (July 23). “We plan to disburse $1.3Bn to the Ministry of Economic Growth and Job Creation to finance programmes announced by the Prime Minister last week, and we plan to disburse $1Bn to the Ministry of Labour and Social Security,” Dr. Clarke said.
• “Any expenditure beyond this amount that falls into this fiscal year will be financed from the proceeds of donations and the donations which have been pledged thus far,” he added. The Minister informed that all expenditures undertaken in relation to Hurricane Beryl will be represented in the First Supplementary Estimates to be tabled later this year.
• Meanwhile, Dr. Clarke said he has been informed by the Caribbean Catastrophe Risk Insurance Facility (CCRIF) that Jamaica’s tropical cyclone and excess rainfall policies have been triggered with payout amounts of US$16.3Mn (J$2.5Bn) and US$10.3Mn (J$1.6Bn), respectively. He further noted that the path and intensity of Hurricane Beryl did not trigger Jamaica’s catastrophe bond.
• “As such, the disaster risk financing resources available to the Government, due to the pre-financing of disaster risk, totals approximately $10.9Bn, made up of $5.3Bn in the contingencies, $4.1Bn from CCRIF, which is to come; $1Bn, which we have budgeted for the National Natural Disaster Risk Fund; and National Disaster Fund of $500Mn,” Dr. Clarke highlighted.

 (Source: JIS)