• Fitch Solutions is maintaining its core view that growth in Bermuda will slow over the coming years after a stronger-than-expected post-pandemic rebound. Fitch forecasts real GDP growth of 2.3% in 2024 and 2.1% in 2025, down from a revised estimate of 4.3% growth in 2023.
• The tourism and international financial service sectors will remain key drivers of headline growth, though less favourable base effects, capacity constraints and slower growth in the US - the main source market for tourists - will pose headwinds over the coming quarters.
• Fitch expects domestic demand growth will moderate after recovering to pre-pandemic levels, with cost of living pressures likely to remain a drag on private consumption despite moderating inflation.
• On the fiscal front, government spending and public investment will make limited contributions to headline growth in 2024 as the government continues to prioritise fiscal consolidation in the short term.
• Risks to the growth forecasts are tilted to the downside; a renewed increase in commodity prices would drive up inflationary pressures in Bermuda and further weigh on consumption and investment activity.
• Further, a sharper-than-expected slowdown in the US would also likely lead to weaker growth in Bermuda due to its significance for the key tourism sector. More generally, Bermuda’s small size, narrow export base, and over-reliance on financial services and tourism leave it vulnerable to external shocks.

(Source: Fitch Solutions)

• Britain's new government took a first step on Tuesday to boost public and private investment to modernise the economy, placing a National Wealth Fund to sit atop the existing state-owned British Business Bank and UK Infrastructure Bank.
• Prime Minister Keir Starmer and his finance minister Rachel Reeves hope to attract investment in new and growing industries as part of their push to speed up Britain's economy and meet the challenge of net zero.
• Business investment in the country has been weak since the 2016 Brexit vote, which triggered years of political instability and caused much of the country to lag behind London in terms of productivity. Labour plans to allocate an additional 7.3 billion pounds ($9.35 billion) of public money via the existing UK Infrastructure Bank so investments can be launched immediately.
• The government hopes to attract three times as much from private capital to invest in areas such as ports, hydrogen, automotive, and steel. Officials say the new fund will serve as a sovereign-backed green catalytic fund and will not resemble sovereign wealth funds operated by resource-rich countries such as Norway and Saudi Arabia. The government will bring forward new legislation to cement the fund in statute, making it a permanent institution, the finance ministry said.

(Source: Reuters)

• U.S. small-business confidence increased to a six-month high in June, but inflation worries lingered amid a rise in the share of owners planning to raise compensation for workers over the next three months. The National Federation of Independent Business (NFIB) said on Tuesday that its Small Business Optimism Index climbed 1 point to 91.5 last month, the highest level since last December.
• Nonetheless, June marked the 30th straight month that the index stayed below the 50-year average of 98 as inflation concerns remained on the radar and higher borrowing costs weighed on capital investment. A net 22.0% of businesses planned to increase compensation in the next three months, up 4 points from May. That was despite 37.0% of owners reporting job openings they could not fill, down 5 points from May.
• The NIFB, however, noted that the labour market remained tight in the construction, transportation, and retail sectors. About 16.0% of businesses reported unfilled positions for unskilled labor, an increase of 2 points from the prior month. In contrast, the share of owners reporting open vacancies for skilled workers dropped 6 points to 31.0%. Job creation plans were unchanged.
• Government data on Thursday will likely show consumer prices nudging up 0.1% in June after being unchanged in May, according to a Reuters survey of economists. The annual increase in consumer inflation is forecast to have slowed to 3.1% in June from 3.3% in May.
• Higher borrowing costs are constraining capital expenditure, with the share of small businesses reporting capital outlays in the last six months dropping 6 points to 52.0%, the lowest level since August 2022. The proportion of planning capital outlays over the next six months was unchanged at 23.0%.

(Source: Reuters)

• The Office of the Minister of Finance and Public Service has highlighted that the Government of Jamaica (GOJ) has strategically put in place a multilayered set of financial instruments to pre-finance the emergency response and recovery costs of natural disasters. Although not all storms will activate every instrument, the concept is that the nation should have the capability to utilise some instruments' resources for each storm.
• As such, the preliminary and anecdotal assessments of the damage suggest that the GOJ will need to utilize all available resources from the first two layers: the Contingency Fund and the Natural Disaster Fund, which together amount to $4.5Mn.
• The Office also emphasized the possibility that the country may need to tap into an additional layer of funding, which includes a Contingent Credit Claim with the IDB. Although the maximum available under this layer is roughly $46Bn, it will require a few days to determine precisely how much will be activated by Beryl and the amount necessary.
• “Regarding the top layer in our disaster risk framework, the path and intensity of Hurricane Beryl did not trigger Jamaica’s Catastrophe Bond, which essentially serves the purpose of providing financial protection against a Category 5 or very intense Category 4 hurricane making landfall in Jamaica.” In addition to the above, the GOJ has a $140Bn precautionary and liquidity line (“PLL”) with the IMF. The PLL is intended for countries with strong fundamentals and can be drawn in the event of liquidity problems that emerge from natural disasters or economic shocks.
• While it is too early to rule anything out, the Office does not anticipate that Hurricane Beryl has led to, or will lead to, liquidity issues for the GOJ. At the current time, the facility is unlikely to be drawn.

(Source: JIS)

• Preliminary estimates indicate that the island’s agricultural sector has suffered over $1Bn in damage due to the passage of Hurricane Beryl. Minister of Agriculture, Fisheries, and Mining, Hon. Floyd Green, disclosed during an assessment tour of farms in sections of St. Elizabeth on Saturday (July 6).
• He noted that there was damage to all crop lines. “In fact, we have seen about 85% of our banana and our plantain lines go down in Portland and St. Mary, but when you come to the southern parishes, our vegetable lines and tubers such as cassava were mainly impacted.
• We have seen a lot of damage to fruit trees – ackee, breadfruit, and unfortunately, there was significant damage to our greenhouse farmers,” he noted. Minister Green said he plans to update Parliament on Tuesday (July 9) on the extent of the damage and outline a programme of response.
• The Minister said that some 90% of greenhouse farmers across the southern parishes of Clarendon, Manchester, and St. Elizabeth were affected, with several of them losing crops and structures.
• Over the past year, the sector has struggled with high food prices due to drought conditions. There has been some relief in recent months as improved production has led to falling prices for produce and has supported a reduction in inflation. However, with the damage to the sector from Hurricane Beryl prices are likely to rise in the face of lower supplies.
• This could place upward pressure on the inflation rate in the coming months, especially since the Food division carries the most significant weight within the consumer price index (CPI).

(Sources: JIS & NCBCM  Research)

• The Caribbean’s agriculture sector has been severely devastated by Hurricane Beryl, which made landfall on the islands of Barbados, Grenada, St. Vincent and the Grenadines Jamaica, and several other islands last week.
• This effefts of the Hurricne resulted in a setback of the region’s food security vision of reducing its food import bill by 25% by 2025. According to Guyana’s President and the Caribbean Community’s (CARICOM) chairperson Dr. Irfaan Ali, initial reporters have indicated that the sector has suffered tens of millions in losses.
• “The initial assessment is heart-wrenching to our farmers, our government, and the people of these countries. It is heart-wrenching because of the tremendous investment, policy commitment, and budget support that was placed in the agriculture sector since 2020,” Dr Ali, who is also the lead Head of Government with responsibility for agriculture, agricultural diversification, and food security in the region Quasi Cabinet, said.
• While an initial assessment of the impact of the sector is ongoing, Dr Ali noted that there will be a ‘comprehensive’ analysis with technical and financial stakeholders.
• Guyana’s Agriculture Minister, Zulfikar Mustapha, who is the Chairman of the Ministerial Task Force on Agriculture, has been tasked to convene a strategic meeting in the new week. It is expected that leaders will explore ideas on how the islands can rebuild, make technology available, and plant quick-yielding varieties to support farmers. In addition to this, leaders will seek to address price stability and critical commodities needed.
• In the meantime, the CARICOM chair has engaged with several regional and international stakeholders to discuss relief efforts.

(Source: Guyana Chronicle)

• Guyana’s Natural Resource Fund (NRF) received US$246Mn (GY$51.3Bn) in revenues from oil sales in June, government data shows. The funds were paid for three lifts of Guyana’s crude entitlement from the ExxonMobil-operated Stabroek Block.
• With 25 lifts of crude expected for Guyana in 2024, the government reported sales for 15 lifts in the first half of the year. Each lift contains approximately one million barrels. Therefore, given continued higher than expected production, Guyana could receive more lifts than it projected in 2024.
• Of the US$2.08Bn projection for government revenue from oil sales this year, the NRF has received US$1.22Bn.Of note, the Fund received no royalties in June. The last such payment was in April, and the next is expected in July. Of US$319.9Mn projected, the NRF received US$162.4Mn.
• Up to June, Guyana received US$1.38Bn of the US$2.4Bn in revenues from oil sales and royalties expected in 2024. Its projections are based on an expectation of approximately 552,000 barrels per day (b/d) oil production from the Stabroek Block this year, though average production in the first five months was 619,000 b/d.
• All revenues are derived from crude oil production at the Stabroek Block. The three projects in production are Liza 1, Liza 2, and Payara. Three additional projects are on track to come on stream in 2025, 2026, and 2027. They are expected to lift current production to more than double by 2027. ExxonMobil is the operator with a 45% stake, while Hess (30%) and CNOOC (25%) are its partners.
• Oil and gas royalties refer to the payments made to the owner of the mineral rights (often the government or private landowners) for the rights to extract oil and gas from the land. These royalties are typically a percentage of the revenue generated from the production and sale of the oil and gas extracted from the land. Contractor pays a Royalty of two percent to Guyana’s Government on the value of all petroleum produced and sold
• Revenues from crude oil lifts refer to the income generated from the sale or transfer of crude oil extracted from the ground. These revenues are usually calculated based on the volume of crude oil lifted (extracted and sold) and the prevailing market price per barrel at the time of sale.

 (Source: Oil Now & NCBCM Research)

• According to a Federal Reserve Bank of New York report, the path U.S. inflation is expected to follow over coming years generally softened in June amid retreating projections of price increases for a wide array of consumer goods and services.
• Inflation a year from now was seen at 3% as of June, from the expected rise of 3.2% in May, while three years from now, inflation was seen at 2.9% from May’s 2.8%, according to the bank’s latest Survey of Consumer Expectations. Inflation five years from now was seen at 2.8% from May’s 3%.
• The report found that expected price gains for gas, food, rent, medical, and college costs all moderated in June relative to what survey respondents projected in May. Expected year ahead home price gains also cooled, hitting 3% in June from the prior month’s 3.3%.
• Ebbing price pressure expectations came in a landscape where survey respondents said they see future earnings growth rising at a faster pace and future income growth slowing. Spending expectations held steady at a pace above where it was before the coronavirus pandemic struck. The survey also found respondents saying credit is getting slightly harder to get as they also marked down their household’s financial situation. Respondents' outlook on the job market was mixed.
• The New York Fed report, which is closely watched for what it says about how the public foresees inflation developing, came as central bankers are actively debating whether inflation pressures have moderated enough to allow them to cut their short-term interest rate target.

(Source: Reuters)

• Euro area investor sentiment lost its recovery trend and fell sharply in July as both the current situation and expectations worsened amid geopolitical worries, a closely watched survey showed on Monday.
• Investor morale in the euro zone broke an eight-month streak of improvements with a bigger-than-expected decline in July, a survey showed on Monday, describing the results as a "bitter setback".
• The Eurozone Sentix Investor Confidence index for the euro zone fell to -7.3 points for July from 0.3 in June, which was the first positive score since February 2022, the behavioral research institute Sentix reported. The expected score was -0.6.
• The current situation index declined to -32.3 from -26.3 in June. The drop follows three consecutive months of gains. Simiarily, the expectations component lost 8.5 points, falling to 1.5 in July from 10.0 in June, a move that Sentix said was "likely to worry forecasters". "The recent recovery of the European economy has come to an abrupt end," Sentix said.
• The survey said that investors were concerned about French elections, upcoming German state elections, and uncertainty over the U.S. presidential election later this year.

(Sources: Reuters & Business Insider)

• “I am proud to share that the Financial Action Task Force, at its Plenary in Singapore on Friday, June 28, 2024, removed Jamaica from its ‘Grey List’ of countries that are assessed as having strategic deficiencies in their Anti-Money Laundering/Countering Financing of Terrorism (“AML/CFT”) Regimes”. The Minister Finance and the Public Service, Nigel Clarke, issued the aforementioned statement from the Financial Action Task Force (FATF) meetings in Singapore last week “
• This is a significant achievement for Jamaica. In February 2020, Jamaica was placed on the Grey List by FATF. Placement on FATF’s “Grey List” signals to international financial and other institutions to take special care when transacting with entities and individuals from a FATF “Grey Listed” country. This makes transacting with FATF “Grey Listed” countries more expensive.
• In the aftermath of the FATF “Grey Listing”, the Government of Jamaica (“GOJ”) agreed to a 13-point action plan with FATF to address Jamaica’s AML/CFT deficiencies. A Joint Group from FATF visited Jamaica six weeks ago for an onsite visit to assess the effectiveness of Jamaica’s implementation of Jamaica’s action plan.
• The Joint Group confirmed to FATF that Jamaica has a robust and comprehensive understanding of its money laundering and terrorist financing risks and in its report to FATF, the Joint Group highlighted that, in some instances of the implementation of its AML/CFT framework, Jamaica was an example of global good practice.

(Source: JIS)