• Bank of Jamaica (BOJ) announced its decision to increase the policy interest rate (the rate offered to deposit-taking institutions on overnight placements with BOJ) by 50 basis points to 6% per annum, effective August 19, 2022.
• The Bank also decided to continue pursuing other measures to contain Jamaican dollar liquidity expansion and maintain relative stability in the foreign exchange market.
• BOJ has indicated that it has been encouraged by the direction of the last three CPI reports. Having peaked in April 2022, inflation in May and June was 10.9%, followed by a slight decline to 10.2% in July. Declining international commodity prices, relative stability in the exchange rate and higher interest rates, have allowed for this trend.
• The Bank, however, believes that the conditions that led to these outturns have not sufficiently solidified to ensure that inflation is sustainably on a downward path. Should these variables begin to solidify in the near future, the BOJ has stated that it is prepared to pause its monetary policy tightening. 
• Inflation is projected to generally stabilize over the remainder of the year, consistent with the consensus forecast for a fall in commodity prices and the Bank’s overall monetary policy stance.
• Inflation is also projected to fall to single digits in early 2023 and to enter the Bank’s target range by the end of 2023, as long as the conflict between Russia and Ukraine does not escalate and inflation among Jamaica’s trading partners continues to fall.
• The Bank’s current decision has resulted in a cumulative increase in the policy rate of 550 basis points since October 2021, which has taken the policy rate to a level that the Monetary Policy Committee tentatively considers appropriate.

(Source: BOJ)

• According to the Planning Institute of Jamaica (PIOJ), the Jamaican economy reported a 5.7% expansion in GDP for the June quarter relative to the corresponding quarter for 2021. The estimated output in the Goods Producing Industry declined by 0.4%, while the Services Industry increased by 7.7%.
• The performance was premised on a few key factors, including increased employment, both locally and in major trading partners; and greater resumption of tourist, economic and business activities due to the removal of COVID-19 measures.
• The growth in the Services Industry was due to improved performance in all eight (8) industries. However, Hotels & Restaurants led the recovery, registering an increase of 55.4%. The other major contributors to the performance in the Services Industries were Other Services (25.0%), Transport, Storage & Communication (10%) and Wholesale & Retail Trade; Repairs; Installation of Machinery & Equipment (5.8%).
• On the other hand, the performance of the Mining & Quarrying (-60.6%) and Construction (-4.2%) Industries led to the decline in the Goods Producing Industries. This was however tempered by growth in the Manufacturing (2.8%) and Agriculture, Forestry & Fishing (12.6%) Industries. The outturn in the Mining & Quarrying Industry continues to be impacted by the closure of the JAMALCO alumina plant in Clarendon after a fire in August last year. Operations at the plant are however expected to fully resume during the latter part of this fiscal year.
• For the September 2022 quarter, PIOJ anticipates that the Jamaican economy will expand within the range of 2-3%, given a continuation of recovery efforts, reopening of the JAMALCO plant, improved labour market outturns and a strengthening of the global economy, supported by a restoration in global supply chains in key areas such as energy and grains.
• Current projections are that for all quarters of FY2022/23, the country will record higher levels of output relative to the subdued performance in FY2021/22. As such, the PIOJ's projection is for growth in output within the range of 3-5% for the full FY2022/23. It must however be noted that the economy is not expected to attain pre-COVID GDP levels until FY2023/24.
• However, the downside risks to the outlook are the presence of the ever-evolving COVID-19 virus, Monkeypox, and the negative impact of inflation and interest rate challenges on consumers and businesses.

(Sources: PIOJ & NCBCM Research)

• President Luis Abinader affirmed that despite the country facing the highest international inflationary levels in the last 14 years, the government had approved a package of measures and actions to mitigate it to the extent possible without neglecting the leading macroeconomic indicators.
• The President highlighted that the country’s inflation is below the average of the region and other countries of world reference. The low inflation levels have been achieved without increasing the weight of the consolidated public sector debt concerning the Gross Domestic Product and with a reduction of the non-financial public sector debt, which has dropped from 49.7% in August 2020 to 47.5% in June 2022.
• Notably, the country has the highest level of reserves in history with US$14.5Bn, employment levels are higher than in the pre-COVID stage, tourism is experiencing record growth and the free zones will close this year with the best export data in their history.
• Additionally, since the war between Russia and Ukraine began, the government has allocated RD$42.8Bn in a program of subsidies for the protection of the working classes, as well as for the most vulnerable, mainly to subsidize 100% of the increase in fuel prices and directly for fertilizers and other components used in agricultural production.

(Source: Dominican Today)

• Chairman of the Barbados Hotel and Tourism Association (BHTA) Renee Coppin is pinning hopes for improvement in low hotel occupancy levels on Barbados’ ability to attract more airlifts into the island.
• Coppin noted that relative to 2019, the island had experienced a near 60% decrease in airlift for the current summer period, with the resulting decline in tourism arrivals and hotel occupancy.
• Consequently, the organization is of the view that there must be a laser-focused approach to the question of airlift supply for the island, given that the numbers point to being 58.3% down on 2019 levels for the comparable period of June to October 2022. According to Coppin for the summer period airlift is down by almost 60%.
• This was a “particularly critical” issue the BHTA chairman said, “given that many of our sister destinations across the region are not reporting similar levels of decline.

(Source: Nation News)

• Turkey's central bank shocked markets on Thursday, August 18, 2022, by cutting its main interest rate by 100 basis points to 13%, saying it needed to keep driving economic growth despite inflation hitting nearly 80% and a monetary tightening trend among its peers worldwide.
• The lira dropped as much as 1.2% as the bank took its latest step down the unorthodox policy path advocated by President Tayyip Erdogan that aims to provide targeted cheap credit to help boost Turkish exports.
• There had been virtually no signal that another rate cut was in the works and no economist polled by Reuters had predicted one, given that inflation has soared to 24-year highs, eating deeply into Turks' earnings and savings.
• The bank had held its main rate at 14% for the past seven months after cutting it by 500 basis points towards the end of last year. That policy easing sparked a currency crisis in December that sent inflation soaring.
• The rate cuts long urged by Erdogan - who holds sway over the bank after ousting several of its governors in recent years - have left real interest rates in deeply negative territory and have accelerated a cost-of-living crisis for Turkish households. However, the central bank's policy-setting committee said it needed to act because leading indicators pointed to a loss of economic momentum in the third quarter.

(Source: Reuters)

• The U.S. existing home sales fell to a fresh two-year low in July, further evidence that the Federal Reserve's aggressive monetary policy tightening campaign was dampening demand for housing, although home price levels remain high.
• Existing home sales dropped 5.9% to a seasonally adjusted annual rate of 4.81Mn units last month, the lowest level since May 2020 when sales hit their low point during the COVID-19 lockdowns, the National Association of Realtors said on Thursday. Outside the pandemic, sales were the slowest since November 2015. It was the sixth straight monthly sales decline.
• Home resales, which account for the bulk of U.S. home sales, plunged 20.2% on a year-on-year basis. The report came on the heels of data this week showing single-family housing starts, which account for the biggest share of homebuilding, tumbled to a two-year low in July. The National Association of Home Builders/Wells Fargo Housing Market sentiment index fell below the break-even level of 50 in August for the first time since May 2020.
• Mortgage rates, which move in tandem with U.S. Treasury yields, have soared even higher. The 30-year fixed-rate mortgage is hovering around an average of 5.22%, up from 3.22% at the start of the year, according to data from mortgage finance agency Freddie Mac.

(Source: Reuters)

• Junior market companies ICREATE Limited (ICREATE) and Edufocal Limited (LEARN) which operate in the education space, both reported higher net profits in their most recent six months. ICREATE reported a net profit of J$16.50Mn (EPS$0.09) for the period ended June 30, 2022, a 271.8% improvement over 2021. LEARN recorded a net profit of J$11.58Mn (EPS $0.02) for its six months ending June 2022 versus a deficit of J$5.25Mn in 2021.
• Both ICREATE (239.1%) and LEARN (163.9%) saw vast improvements in revenues as business activity increased. ICREATE’s performance was positively impacted by a mix of new business clients as well as existing opportunities from their pipeline which were closed in Q2. LEARN saw an increase in its Edufocal Academy division as schools reopened, and from the business division due to the onboarding of new corporate customers.
• While ICREATE recorded a 680.3% increase in its cost of sales, both companies saw a 108.4% (ICREATE) and 88.9% (LEARN) rise in their administration and general expenses. Although this weighed on profitability, owing to strong revenues ICREATE’s net profit margin rose from 18.6% to 20.4%, while LEARN saw a turnaround from -10.4% to 8.7%.
• There has been a noticeable increase in the demand for digital creative and design training, especially among large institutions which ICREATE intends to capitalize on by aggressively pushing business growth across its divisions including digital marketing and advertising. Management is also actively working on several M&A and other Joint Venture collaborations. This should support continued strong revenue growth while the company looks closely at managing cost efficiencies.
• The acquisition of Clever School Teacher (CST), a software as a service (SaaS) business in March 2022 allowed EduFocal to forge a pathway into the American edtech marketplace. The large database of content which was acquired should also enhance its ability to reach other territories and attract new customers. The company is currently in conversations to leverage the content for B2B opportunities in both the United States and Jamaica, which is expected to support revenue growth in the coming quarters.
• ICREATE’s stock price has increased by 443.2% since the start of the calendar year while LEARN increased by 178.0% since listing on March 15, 2022 ICREATE and LEARN closed Wednesday’s trading session at $4.22 and $2.78, respectively. LEARN currently trades above the Junior Market Others Average with a P/E of 61.8x. ICREATE currently trades at a P/B of 49.9x which is above the Junior Market Other P/B average of 10.2x.

(Sources: JSE & NCBCM Research)

• For the period January to April 2022, Jamaica’s total spending on imports was valued at US$2,341.6Mn, while earnings from exports were valued at US$511.1Mn, as reported by the Statistical Institute of Jamaica (STATIN).
• There was a 34.4% year-over-year increase in imports due to increased spending on all sub-categories of imported goods.
• Total exports for the review period only increased by 1.3% compared to the US$504.4Mn earned in the period last year. The increase in exports was due primarily to a 52.9% increase in the value of export of “Mineral Fuels”.
• Domestic exports for the review period increased by 1.4% to a value of US$438.9Mn; accounting for 85.9% of total exports. This increase was due mainly to a 43.3% rise in export from the Manufacture industry.
• The five main trading partners for the period were the United States of America (USA), China, Brazil, Trinidad and Tobago and Ecuador accounting for 62.3% of total imports valued at US$1,458.0 million, an increase of 40.5%. This was largely due to higher imports of fuel from the USA and Ecuador.
• The top five destinations for Jamaica’s exports were the USA, Canada, Puerto Rico, the Russian Federation and the United Kingdom. Exports to these countries increased by 35.5% to US$424.2Mn. This was attributed to higher exports of fuels to the USA.
• The country continues to run a trade deficit which weighs on the country’s GDP, despite growing by 6.4% in the first quarter. The higher level of imports to exports also indicates a greater dependence on foreign economies which makes Jamaica more susceptible to imported inflation.

(Source: STATIN)

• The latest monthly report on Guyana’s Natural Resource Fund (NRF) shows that the account earned GY$10.646 billion in royalties and GY$50.127 billion in oil profits. This totals approximately GY$60.773 billion (US$291.477 million).
• The Bank of Guyana report states that net outflows for the month totalled $41.7 billion. This was the second withdrawal ever made by the government from the Fund, to support the 2022 budget. The withdrawal was approved earlier this year by the National Assembly. This left the balance of the fund at GY$176.3 billion (US$845.608 million).
• For the full quarter ended June 30, 2022, the account recorded a profit of GY$266.04 million (US$1.28 million) solely due to interest earned on deposits.
• Inflows to the Fund at that time as well amounted to GY$48.4 billion (US$232.16 million) comprising oil profit – GY$44.01 billion (US$211.11 million) and royalties – GY$4.39 billion (US$21.06 million).
• The Natural Resource Fund was formed by the enactment of the Natural Resource Fund Act 2019 which was passed in the National Assembly on January 3, 2019, and assented to by the President on January 23, 2019. The Act gives the Bank of Guyana the responsibility for the operational management of the Fund. To date, there has been no investment mandate for the Fund and all petroleum revenues are held as cash deposits in the account.

(Source: Guyana Chronicles)

• The first ship to depart Ukraine under a deal to resume grain exports from the country two weeks ago docked in the Syrian port city of Tartous on Tuesday, August 16, 2022, according to a shipping source and satellite data.
• The Sierra Leone-flagged Razoni set sail from Ukraine's Odesa port on Aug. 1 under a hard-won grain deal but did not unload in Lebanon as planned. Its location had not been clear in recent days as it has kept its transponder off.
• The cargo of 26,000 tonnes of corn had originally been destined for Lebanon, which has been suffering an economic crisis that has plunged about half of its population into food insecurity.
• However, the original buyer refused the delivery over quality concerns and the ship sailed to Turkey, docking in Mersin on Aug. 11 and unloading part of the cargo there.
• Ukraine has previously accused Syria of importing at least 150,000 tonnes of grain it said was plundered from Ukrainian warehouses after Russia's invasion in February. Russia has denied stealing Ukrainian grain.
• It is important to note that Ukraine's ministry of transport said at the weekend that it was "not responsible for vessel and cargo after it has left Ukraine, moreover after the vessel departed from (a) foreign port".

(Source: Reuters)