• The Federal Reserve could increase the size of its interest rate hikes and raise borrowing costs to higher levels than previously projected if evidence continues to point to a robust economy and persistently high inflation, Chair Jerome Powell told a Senate panel Tuesday. Such economic figures, Powell said, “have partly reversed the softening trends that we had seen in the data just a month ago.”
• The Fed chair also said that inflation “has been moderating in recent months” but added that “the process of getting inflation back down to 2 per cent has a long way to go and is likely to be bumpy.” Inflation, as measured year over year, has slowed from its peak in June of 9.1% to 6.4%.
• Powell’s comments raise the possibility that the Fed will increase its key interest rate by a half-percentage point at its next meeting on March 21-22, after having carried out a quarter-point hike in early February.
• The Fed chair’s warning of potentially more aggressive hikes led some economists to pencil in higher rates for later this year than they had previously estimated. Rising rates can not only cool consumer and business spending, weaken growth, and slow inflation; they can also send the economy sliding into a recession.
• Additionally, the Fed’s monetary policy report to Congress, which it publishes in conjunction with the chair’s testimony, said that quelling inflation will likely require “softer labour market conditions” — a euphemism for fewer job openings and more layoffs.

(Source: AP News)

• China's exports and imports with Russia surged at a double-digit pace in January-February from a year earlier, customs data showed on Tuesday, as China said it had to advance relations with its northern neighbour in an increasingly turbulent world.
• China's exports to Russia jumped 19.8% in the first two months, to a total of $15 billion, while it recorded shrinking demand from markets elsewhere. Imports from Russia soared by 31.3% to $18.65 billion. That left the world's second-biggest economy's trade deficit with Russia at about $3.6 billion.
• China's seaborne imports of Russian oil are set to hit a record this month after refiners took advantage of cheap prices as domestic fuel demand rebounded following the lifting of COVID-19 curbs, Reuters reported last week.
• Foreign Minister Qin Gang told a news conference on the sidelines of an annual parliamentary session in Beijing on Tuesday that China had to advance its relations with Russia as the world becomes more turbulent.
• China's trade with Russia hit a record high in 2022 as Western countries imposed sanctions on Russia over its invasion of Ukraine.

(Source: Reuters)

• Jamaica’s debt stock decreased over the 12 months between March 2022 and February 2023.
• Minister of Finance and the Public Service, Dr. the Hon. Nigel Clarke, advised that total public debt fell from $2.18 trillion in March 2022, to $2.16 trillion last month.
• He provided the update during Wednesday’s (March 1) meeting of the Standing Finance Committee of the House of Representatives, whose members were reviewing the 2023/24 Estimates of Expenditure.
• Clarke further indicated that Jamaica’s debt service obligations for 2023/24 will be lower than those for the current fiscal year. He noted that last year, the principal repayment on our debt was $162 billion and forecasts $125 billion in 2023/24,
• The debt-to-GDP ratio is projected to be down to about 74.2% at the end of the 2023/2024 fiscal year. As the government continues to lower its debt-to-GDP ratio, it expands its fiscal capacity to spend more on productive activities to bolster economic growth.

(Source: JIS News)

• Local businesses are encouraged to take advantage of opportunities under the CARIFORUM-UK Economic Partnership Agreement (EPA), designed to open up and enhance trade between the UK and signatory CARIFORUM States. This is a reciprocal trade and development partnership that facilitates duty-free, quota-free access for CARIFORUM exports, among other things.
• Minister of Industry, Investment, and Commerce, Senator the Hon. Aubyn Hill, has encouraged local businesses to leverage the opportunities available under the EPA to enable them to access the large retail sales market of the UK, valued at £496 billion.
• Total trade between Jamaica and the UK was £397 million at the end of the third quarter of 2022, an increase of 43.3% over 2021. UK imports from Jamaica were £304 million, of which £44 million (14.5%) were goods and £260 million (85.5%) were serviced. The UK’s exports to Jamaica were £93 million, of which £46 million (49.5%) were goods, and £47 million (50.5%) were services.
• Considering the difficulties Jamaica’s small and medium-sized enterprises (SMEs) have faced to enter the international market, the EPA can be of assistance.
• The CARIFORUM-UK EPA, which came into effect in January 2021, is working to permanently remove trade barriers between the UK and the Caribbean such as allowing duty-free access. This will reduce the costs for MSMEs in Jamaica to penetrate UK markets and allow them to have a competitive advantage to grow their businesses.

(Source: JIS News)

• Guyana's upcoming auction of offshore oil exploration blocks has lured at least 10 companies including Shell, Petrobras and Chevron, to consider the decade's hottest oil region.
• The South American country is offering 14 offshore blocks in an attempt to speed up economic development and reduce an Exxon Mobil-led consortium's dominance of its oil sector. Winning bidders are expected to be picked next month.
• Companies interested in the April round have paid for seismic data to evaluate the blocks to decide whether to submit offers. They include six big international producers, Energy Minister Vickram Bharrat has said, without identifying the companies.
• Guyana estimates it has up to 25 billion barrels of oil and gas in place off its coast. A consortium that includes Exxon Mobil, Hess Corp, and CNOOC Ltd, operates the country's most important area, the 6.6-million-acre (26,800 sq km) Stabroek block, with more than 30 discoveries to date.
• Notably, Guyana plans to issue a new Production Sharing Agreement (PSA) model for leasing offshore blocks by the end of this month.
• The proposed rules will nearly double the government's take from oil production to 27.5% of royalties and profit oil, plus a new 10% corporate tax, compared to Exxon's main contract. The new agreement also will require producers to provide more information to the nation in order to reduce information asymmetries.

(Source: Reuters)

• Fitch Solutions holds its Short-Term Political Risk Index (STPRI) score for Costa Rica at 62.4 out of 100, as they expect broad political and social stability to persist during 2023.
• Despite a slowing economy and fiscal consolidation, President Rodrigo Chaves's high level of popularity and easing inflationary pressures will limit the risk of social unrest during 2023.
• Economic conditions improved during H222 despite moderating growth. Inflation peaked at 12.1% y-o-y in August before falling back to 7.9% by the end of the year, while the unemployment rate fell to 11.7% at end-2022, from 13.7% a year earlier. Further, the government's budget deficit fell to 2.5% of GDP in 2022 from 5.0% in 2021, easing fiscal risks.
• Additionally, Fitch believes easing inflationary pressures will contain the threat of social instability over the coming quarters. Currently, it is forecasted that inflation will fall gradually to 4.8% by the end of 2023, reducing pressure on household budgets (though above the Central Banks target of 2-4%). It is also expected that the central bank will begin to cut its policy rate in H223, easing borrowing costs for consumers and businesses.
• On the other hand, a forecasted uptick in the unemployment rate to 12.0% in 2023 as economic activity moderates will continue to weigh on its score, specifically, the 'social stability' component of the STPRI.
• Despite the relatively favourable outlook, Fitch believes there are still some downside risks to stability. A sharper economic downturn or more persistent inflationary pressures than currently expected would increase social instability risks. Additionally, a recent increase in migration into Costa Rica, particularly from Nicaragua, could also potentially lead to rising social tensions, which would be exacerbated by a more severe growth slowdown.

(Source: Fitch Solutions)

• The eurozone's economic recovery is tentative and fragile, several indicators suggested on Monday, adding to signs that even if a recession may have been avoided, no upturn is in sight. Some economic readings have been better than feared, particularly through the winter, but Monday's retail trade data, a key sentiment indicator, tempered any nascent optimism.
• Eurozone retail sales, a good proxy for consumer demand, rebounded much less than expected in January, challenging other data, including PMI surveys, which pointed to a steady recovery. Retail sales rose 0.3% on the month, below the 1% rise forecast by economists, and were down 2.3% year on year. That suggests "a weak start to the year for the consumer amid stubbornly high prices," ING economist Bert Colijn said.
• Data last week showed that inflation in Germany, France and Spain - three of the bloc's top four economies - unexpectedly rose in February.
• The European Central Bank is hiking rates at the fastest pace on record, and its chief economist Philip Lane said on Monday that the bank is still likely to keep raising them after a 50 basis point increase this month.
• "The current information on underlying inflation pressures suggests that it will be appropriate to raise rates further beyond our March meeting," Lane said in a speech in Dublin, confirming market expectations for more moves through the spring and possibly the summer.

(Source: Reuters)

• China set a modest target for economic growth this year of around 5% on Sunday as it kicked off the annual session of its National People's Congress (NPC), which is poised to implement the biggest government shake-up in a decade.
• China's gross domestic product (GDP) grew by just 3% last year, one of its worst showings in decades, squeezed by three years of COVID-19 restrictions, the crisis in its vast property sector, a crackdown on private enterprise, and weakening demand for Chinese exports.
• This year's growth target of around 5% was at the low end of expectations, as policy sources had recently told Reuters a range as high as 6% could be set. It is also below last year's target of around 5.5%.
• Beijing faces a host of challenges, including increasingly fraught relations with the United States and a worsening demographic outlook, with plunging birth rates and a population drop last year for the first time since the famine year of 1961.
• China plans to lower the costs of childbirth, childcare, and education and will actively respond to an ageing population and a decrease in fertility, the nation's state planner said in a work report released on Sunday.
• "While the official growth target has been lowered for the second consecutive year, which might be a disappointment to the market, we reckon investors (should) pay attention to the underlying growth momentum to gauge the recovery pace," said Zhou Hao, an economist at Guotai Junan International.

(Source: Reuters)

• The Executive Board of the International Monetary Fund (IMF) approved a 24-month arrangement under the Precautionary and Liquidity Line (PLL) with access of US$968 million (190 per cent of quota), to provide insurance against risks from higher commodity prices, a global slowdown, tighter-than-envisaged global financial conditions, and new COVID outbreaks.
• The Executive Board also approved an arrangement under the Resilience and Sustainability Facility (RSF) for US$764 million (150 per cent of quota) to strengthen physical and fiscal resilience to climate change, advance decarbonization of the economy, and manage transition risks. The RSF is expected to catalyze funding for climate priorities from other official lenders and the private sector.
• The PLL will support the authorities’ plans to improve financial supervision, the Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT) framework, and data reporting.
• Reforms in the RSF, built on Jamaica’s home-grown climate policy, were prepared in close collaboration with the World Bank and other international partners. They create incentives to switch to renewables, reduce energy consumption, develop green financial instruments, and require proper management of climate risks in the financial sector. Reforms are expected to catalyze private and official financing for climate-related investment.
• The Finance Minister said although Jamaica has US$4 billion in gross reserves, the PLL provides an additional balance of payment buffer in the event of additional economic shocks. Funds under the RSF are being made available at an interest rate of 3.8 per cent with 20 years to repay, and no principal repayment for the first 10 years.
• Clarke said this facility should allow Jamaica to attract significant private sector investment so it can implement policies conducive to climate financing. It should also help to reduce Jamaica's refinancing risks and to create fiscal space, compared with the alternative of international capital market refinancing in a rising interest rate environment.

(Sources: IMF and RJR)

• Grace Kennedy Limited recorded a net profit to shareholders of $7.03Bn for the financial year ending December 2022. This represents a 14.2% yoy decline. If adjusted for non‐recurring gains of $895Mn in 2021 and $170.5Mn in 2022, the decline in net profit for 2022 compared to 2021 would have been 7.7%.
• The decline occurred despite a 10.5% increase in revenues, due to higher costs. Direct and operating expenses amounted to $136.10Bn for the financial year 2022, which represents an 11.9% increase compared to last year. This was primarily due to rising distribution, input and interest costs, supply chain disruptions, and ongoing geopolitical tensions.
• GK’s food business recorded strong overall growth in revenues and an increase in PBT when compared FY 2021. However, the Financial Group recorded a decline in PBT despite an expansion in revenues.
• The stock price has decreased by 4.8% since the start of the calendar year. The stock closed Thursday’s trading session at $79.21 and currently trades at a P/E of 11.2x, which is above the Main Market Conglomerate Sector Average of 10.0x.
• GK also announced that it will launch a share buy-back this year, subject to the approval of its regulators. The proposed share buy‐back is being implemented because the share price is considered to be below its true value and is an opportunity to enhance shareholder value by helping to raise earnings per share.
• Rising inflation, an inconsistent supply chain, increasing interest rates and distribution costs, as well as geopolitical tension remain the main headwinds to GK’s performance in 2023.  Further, currency movements in key operating markets are also expected to factor into business performance for the company this year.

(Sources: JSE and NCBCM Research)