• At its meetings on the 27^th and 28^th of March 2023, the Monetary Policy Committee (MPC) opted to maintain the policy interest rate (the rate offered to DTIs on overnight placements) at 7.0% and continue to maintain relative stability in the foreign exchange market.
• Jamaica’s inflation rate of 7.8% in February 2023 was below the 8.1% recorded in January 2023. Core inflation (which excludes food and fuel prices from the Consumer Price Index) also decelerated to 6.6% in February from 7.1% in January 2023. The key external drivers of headline inflation, such as grains, fuel, and shipping prices, continued to decline broadly in line with the Bank’s expectations. The pace of monetary policy tightening by the United States Federal Reserve Board also slowed as expected. Moreover, recent developments in the US banking system suggest that this slowing could continue as interest rates in that economy may be near their peak.
• Consistent with global consensus forecasts for a fall in commodity prices and the Bank’s overall monetary policy stance, and in the absence of new shocks, the Bank forecasts that inflation is on track to continue decelerating in 2023. However, one-off regulated price adjustments may result in a temporary uptick in inflation. The forecast also assumes that the public’s expectation for future inflation will continue to fall as the prices of imported commodities decline and domestic monetary policy actions take effect.
• Notwithstanding the favourable outlook, the MPC assesses that the near-term risks to the inflation outlook remain elevated. Against the background of continued growth in the domestic economy, labour market shortages carry the potential for future wage adjustments that can put upward pressure on inflation. Higher inflation could also occur from a worsening in supply chain conditions and higher commodity prices if there are further geopolitical disruptions. On the downside, weaker-than-expected global growth could negatively affect domestic demand and some projected adjustments to regulated prices may not materialise.
• At its previous meeting, the MPC unanimously decided to increase by one percentage point (pp) the domestic and the foreign currency Cash Reserve Requirements (CRRs) applicable to deposit-taking institutions (DTIs), effective 01 April 2023. Currently, DTIs are required to hold a minimum of 5.0 per cent of their Jamaican dollar-denominated prescribed liabilities and 13.0 per cent of their foreign currency-denominated prescribed liabilities as cash reserves at the central bank.  With this adjustment, the domestic currency CRR will be increased to 6.0 per cent and the foreign currency CRR will move to 14.0 per cent.
• The Bank will continue to closely monitor the global and domestic economic environments for potential risks that could threaten Jamaica’s inflation target. At the same time, the Bank of Jamaica continues its review of the monetary transmission mechanism to ensure that monetary policy achieves the desired impact on inflation. The date of the next policy rate decision announcement is 29 May 2023.

(Source: BOJ)

• Jamaica is uniquely positioned to further capitalise on the growing demands of tourism. This is through the Tourism Innovation Incubator, which facilitates the implementation of new ideas and experiences among locals to add to the tourism value chain, Portfolio Minister, Hon. Edmund Bartlett highlighted.
• He noted that since the facility’s establishment, several Jamaicans have participated in the initiative, which allows them access to $100Mn to transform ideas into profitable projects. He was addressing journalists at Jamwest Motorsports and Adventure Park in Little London, Westmoreland, following the conclusion of a two-day tour across the parishes of Hanover and Westmoreland, from March 23 to 24.
• This Tourism Innovation Incubator not only sets locals on an economic growth path but further cement Jamaica as a “thought leader” in the region and the world. the more Jamaicans are able to monetise their ideas and experiences in the industry, the more it re-emphasizes tourism’s inclusivity, with locals sharing in the sector’s ownership.

(Source: JIS News)

• Fitch Solutions is forecasting that Saint Lucian's real GDP will grow 3.6% in 2023 from an estimated 12.2% in 2022, and an estimated 11.4% in 2021 as base effects fade and the tourism sector growth slows. 
• Lucia’s economy suffered a catastrophic contraction of -20.4% in 2020, due to Covid’s impact on the tourism industry. The country has been on a road of recovery in the last two years, and Fitch expects that the continued rebound in the travel sector will boost employment and support private consumption.
• In particular, private consumption will be driven by tourism sector growth and the resulting reduction in unemployment, as well as sustained social spending by the government, which will support household incomes.
• Additionally, the government policies of the centre-left Labour Party will keep government spending elevated. As exports and investment growth ease compared to the rebound seen in 2022, Fitch also expects that growth in St. Lucia will normalize closer to 2.0% (2015-2019) in the years ahead, averaging 2.6% growth in 2023-2026.
• Risks to this view, however, are to the downside. As was seen during the pandemic, St. Lucia is extremely vulnerable to outside shocks and is very dependent on the tourism industry. If the economic slowdown is stronger than the current prediction in key tourism markets like the United States, there is likely to be substantially slower growth in St. Lucia in 2023.

(Source: Fitch Solutions)

• Chile detected the first case of bird flu in a human, the country's health ministry reported on Wednesday. The case was detected in a 53-year-old man who presented severe influenza symptoms, according to a statement issued by the ministry, but they noted the patient was in stable condition.
• The government is also investigating the source of contagion as well as others who were in contact with the patient. Chile has reported cases of the H5N1 bird flu since late last year in wild animals.
• Recent cases in industrial farms caused the government to halt poultry exports. Industrial cases have also been detected in Argentina, but Brazil, the world's largest exporter of poultry, remains free of the contagion.
• Chilean health authorities noted the virus can be transmitted from birds or marine mammals to humans, but there is no known human-to-human transmission.
• Earlier this year, Ecuador confirmed its first case of human transmission of bid flu in a 9-year-old girl. Global health officials have said the risk of transmission between humans is low, but vaccine makers have been preparing bird flu shots for humans "just in case."

(Source: Reuters)

• Canadian Finance Minister Chrystia Freeland's promise of a fiscally prudent budget in the face of high inflation has disappointed some strategists who had hoped for spending restraint from the Liberal government.
• Increased spending in the budget leaves the government with less in reserve to deal with a possible economic downturn and it could forestall a shift to interest rate cuts by the Bank of Canada, analysts said.
• The worry is that the deficit, estimated at C$43Bn ($31.7Bn) in 2022-23, or 1.5% of GDP, is wider than it should be at this point of the economic cycle, with the economy running hot, unemployment at a near record low and inflation elevated, analysts said.
• Earlier this month, the central bank paused its tightening campaign after eight consecutive rate hikes to tackle price pressures. Money markets are betting it will shift to cutting interest rates over the coming months after recent stress in the global banking sector raised prospects for a credit crunch.

(Source: Reuters)

• The Bank of England on Wednesday told regulators to move fast to toughen rules for funds used by Britain's pension industry which nearly collapsed last year after former Prime Minister Liz Truss' "mini-budget."
• The BoE said Britain's banking system was not at risk from the kind of turmoil that has beset some banks in the United States and Switzerland's Credit Suisse. However, the BoE's Financial Policy Committee called on pension regulators to act "as soon as possible" to mitigate the risks posed by liability-driven investment (LDI) funds.
• The BoE was forced to launch a new round of government bond purchases after the announcement by Truss' government of major unfunded tax cuts last September triggered a surge in gilt yields and a spiral of collateral calls and further bond sales.
• LDI funds should set aside enough liquidity to ensure they can withstand a surge in government bond yields of at least 250 basis points on top of other protections against market swings, the BoE said on Wednesday.
• In practice, LDI funds, which are widely used by pension schemes to ensure payouts to pensioners, will have to permanently hold liquidity buffers of around 300-400 basis points, as they have had to do after the mini-budget crisis.
• The Financial Policy Committee (FPC) also said there is a need to toughen the resilience of money market funds (MMF), used by companies for day-to-day financing, and UK regulators will publish a consultation paper on MMF regulation later this year.
• The central bank will also set out in the second quarter details of its first "exploratory scenario" to investigate how banks and non-banks react collectively to market stresses. The move is the latest sign of how central banks are taking a closer look at non-banks, which are regulated by securities watchdogs which have traditionally resisted such moves.

(Source: Reuters)

• Minister of Tourism, Hon. Edmund Bartlett says the tourism sector has grown by 36% over the past 30 years, against a total economic growth of 10%. He noted that the sector is the single largest contributor to Jamaica’s gross domestic product (GDP), as well as a main source of foreign revenues.
• Tourism is multidimensional and multifaceted, interfacing with nearly every economic sector, including agriculture, manufacturing, transportation, finance, the creative and cultural industries, construction, and many other services. The tourism sector drives 15% of construction, 10% of banking and finance, 20% of manufacturing, and 21% of utilities, agriculture, and fisheries.
• Speaking at a Destination Assurance Framework and Strategy (DAFS) consultation meeting at the Negril Community Centre, Norman Manley Boulevard, Westmoreland on March 23, Mr. Bartlett also pointed to the quick recovery of the tourism sector, following the impact of the COVID-19 pandemic, noting that 2022, was a record year.
• Closing 2022 with some 3.3Mn visitors and earnings of US$3.6Bn, 2023 is shaping up to be another record year with stopover arrivals for the first ten weeks at 558,119, a 55.6% increase over the same period last year. The Minister stressed the importance of keeping the sector on a growth trajectory, noting that as it grows, more Jamaicans will benefit from “this larger tourism pie”.
• Given linkages to other sectors, tourism growth will have a magnified effect on the wider economy. As tourism continues to grow, other sectors will benefit directly or indirectly, thus resulting in stronger economic growth in years to come.

(Source: JIS News)

• The Jamaica Special Economic Zone Authority (JSEZA) continues to secure employment for citizens and investment opportunities for companies to operate in the special economic zones (SEZs). Details of this were shared during a meeting hosted by the Authority at its offices located at 13 Waterloo Road in Kingston, on Monday, March 27.
• JSEZA’s Interim Chief Executive Officer, Kelli-Dawn Hamilton, pointed out that “we would have recorded over US$750Mn investment in the economy through our SEZs as well as within the SEZ space, with over 60,000 jobs being created.
• The objective is to work across government and create partnerships which will ultimately result in growth for the economy through greater employment. As a member of the World Free Zone Organization, JSEZ has initiated 13 very strong projects that will change the landscape in Jamaica.
• In addition to these partnerships, JSEZA is keen on attracting different sectors including, energy manufacturing, tourism, and the global digital services sector.
• The JSEZA is an agency of the Ministry of Industry, Investment, and Commerce, responsible for facilitating the development of and promoting investments in SEZs in Jamaica. The initiatives and projects undertaken by the agency are expected to provide employment and boost economic growth.

(Source: JIS News)

• The Biden administration plans to send Mexico an "act now or else" message in the coming weeks in an attempt to break a stalemate in an energy trade dispute as bipartisan calls grow for the U.S. to get tougher with its southern neighbour, according to people familiar with the discussions.
• The move would represent a significant escalation in already-strained tensions between U.S. President Joe Biden and his Mexican counterpart, Andres Manuel Lopez Obrador. Obrador's decision to roll back reforms aimed at opening Mexico's power and oil markets to outside competitors sparked the trade dispute.
• S. oil companies, such as Chevron and Marathon Petroleum, along with solar and wind power companies, have struggled to get permits to operate in Mexico in recent years. However, Mexican officials maintained that the companies were not being given discriminatory treatment, but rather that difficulties of a technical nature persist, and investments would be made to address them.
• The Office of the United States Trade Representative (USTR) is expected to make what was described as a "final offer" to Mexico negotiators to open its markets and agree to some increased oversight. If not, the U.S. will request an independent dispute settlement panel under the United States, Mexico, and Canada Agreement (USMCA).
• Under USMCA rules, after 75 days without a resolution the party is free to request a dispute settlement panel; a third party that rules on the case. The United States and Canada demanded dispute settlement talks with Mexico in July, 250 days ago.
• If the panel rules against Mexico and fails to take corrective action, Washington and Ottawa could ultimately impose billions of dollars in retaliatory tariffs on Mexican goods.
• This appeal could escalate trade tensions with Mexico and set back the US’ assistance on immigration and drug trafficking deals. In addition to this, Mexico’s 2023 economic growth is greatly hinged on the nation maintaining good relations with the United States.

(Source: Reuters)

• Fitch Solutions expects that rising interest rates will challenge regional borrowers, even as private sector debt has stabilized after the pandemic in Latin America. Although the company noted the expectation of rate cuts in H2 2023, interest rates will remain well above historical norms through to at least the end of the year.
• While aggregate private sector borrowing in Latin America’s largest markets spiked relative to GDP during the COVID-19 pandemic, this was largely due to a sharp decline in nominal GDP.
• In US dollar terms, debt generally fell in 2020 before rebounding in the following years. As of Q3 2022 (the latest available from the Bank of International Settlements), total private debt rose to US$2.82Tn, up 6.3% from US$2.65Tn in Q419. Relative to GDP, private debt has risen marginally, from 65.0% to 66.8%.
• Among major markets in Latin America, Brazil has seen the largest growth in its private sector debt load in recent years, with Colombia the only other market to see an increase.
• Higher interest rates and concerns about the trajectory of public finances have led to significantly higher bond yields across the region, contributing to the theme for the year that Latin America’s leftist leaders will face policy constraints.
• Market pressure will limit the implementation of transformative spending plans, potentially increasing public frustration with incumbent governments. Interest payments will also eat up a larger portion of government budgets moving forward, leaving less for social spending and investment.

(Source: Fitch Solutions)