• High-interest rates will keep a lid on the pace of bank lending in Europe this year and next, with a particular slowdown in growth in Germany as demand for loans tails off, according to a study by consulting firm EY.
• Lending to businesses and households in the 20-nation eurozone will expand 2.1% in 2023 and 1.7% in 2024, muted increases after a 14-year high of 5% in 2022, EY said in its lending forecast published Monday.
• The European Central Bank last year began raising interest rates in response to the highest inflation in decades, with a recent move in its key rate to a 22-year high and signals of more to come. The eurozone meanwhile dipped into recession earlier this year.
• "While the downturn is expected to be very shallow and short-lived, European markets continue to face high inflation and an unprecedented rise in interest rates. As a result, lending volumes are expected to be challenged by a fall in loan demand, at least for the next two years," EY said.

(Source: Reuters)

• A ‘4E’ strategy has been developed by the Trade Board Limited (TBL) to identify and resolve issues surrounding Jamaica’s exports. Trade Administrator and TBL Chief Executive Officer, Dr. Major (Ret’d) Hugh Blake, says this is among the strategies that are being pursued by the agency to support the country’s export growth
• He was speaking at a recent seminar at the University of the West Indies (UWI) Regional Headquarters in St. Andrew, which provided traders with guidelines on how they can ‘Step-Up Export with Trade Agreements’.
• Blake said the 4E strategy is based on four pillars and is intended to educate, enable, expedite, and evaluate. Regarding education, he noted that one of the mandates is to be the chief repository and disseminator of trade-related information, which provides a huge opportunity to educate. In this context, the Jamaica Trade Information Portal (JTIP) is deemed of significant importance, as it is the primary tool used by TBL to inform traders.
• Regarding enabling, Dr. Blake pointed out that this is where the entity assists exporters to convert the knowledge gained through education into value.
• Equally important is TBL’s recognition of the need to keep up with the pace of transactions through efficiency in its processes by using up-to-date technology. To this end, the entity has established key performance indicators (KPIs) related to the time it takes to do business. He added that since the KPIs’ establishment, “the entity is now operating at a 95% efficiency index, simply because we have decided that those things that we have control over, we are setting them as our KPIs”.
• By focusing on education, enablement, expediting processes, and evaluation, this ‘4E’ export strategy empowers traders with the necessary knowledge and tools, streamlines their operations, and ensures constant performance monitoring for ongoing optimization. This ultimately contributes to the nation's economic growth, making it a significant step forward in strengthening Jamaica's position in the global trade landscape.

(Source: JIS news)

• The quantity of paper-based banknotes now in circulation is expected to be gradually reduced over at least the next 12 to 24 months. This is as the Bank of Jamaica (BOJ) undertakes phased disbursement of the new Polymer replacement versions.
• BOJ Governor, Richard Byles, told JIS News that persons will be able to conduct transactions using the existing banknotes alongside the Polymer versions during the period.
• He noted that while the BOJ only accommodates private persons in relation to exchanges, given the special nature of the new notes, the public will be accommodated to exchange old notes for new ones.
• Meanwhile, the BOJ has issued over $11 billion worth of new banknotes, since the exercise commenced on June 6 with disbursements to deposit-taking institutions (DTIs).

(Source: JIS news)

• Brazil's Senate on Wednesday, June 21, approved fiscal rules proposed by President Luiz Inacio Lula da Silva's government, considered vital in preventing a surge in public debt.
• The project received 57 votes in favour and 17 votes against. Since the senators modified the text that Brazilian deputies approved, it will require another round of voting in the lower house.
• The bill is seen as essential in signalling a path toward sustainability of public accounts, particularly after Lula secured congressional approval for boosting social expenditures to assist the poorest people.
• Under the proposal, government expenditures would not be allowed to rise by more than 70% of any increase in revenue, with spending growth also limited to between 0.6% and 2.5% per year above inflation. If budget goals are not met, expenditure growth would be restricted to 50% of revenue increases.
• The proposal's progress in Congress has been praised by S&P, which last week upgraded Brazil's credit rating outlook to Positive.
• The approval of these new fiscal rules by Brazil's Senate, represents a significant step towards fiscal responsibility and sustainability. This move not only helps to prevent a potential increase in public debt but also ensures a balanced growth in government expenditures, thereby fostering economic stability. The positive reception from international credit rating agencies like S&P further underscores the potential benefits of these measures for Brazil's economic outlook.

(Source: Reuters)

• Mexico's annual inflation hit its lowest in more than two years ahead of a monetary policy decision on Thursday, June 22. As anticipated, the central bank maintained the interest rates at a cycle-high of 11.25%, as the consumer price index remains above target.
• In Latin America's second-largest economy, 12-month headline inflation reached 5.18% in the first half of June, data from the National Institute of Statistics and Geography (INEGI) showed, slowing further but far from the central bank's official target of 3%.
• The lowest since March 2021, the level overshot expectations of 5.30% in a Reuters poll of economists. This reinforced the central bank's decision to keep its benchmark interest rate steady at 11.25% when it announced its decision on Thursday.
• A rate cut remains unlikely after the Bank of Mexico, known as Banxico, paused a nearly two-year tightening cycle in May suggesting it might need to maintain rates at current levels for an extended period to bring inflation down to target.
• Capital Economics' deputy chief emerging markets economist, Jason Tuvey, said Banxico would "almost certainly leave its policy rate on hold" after the latest consumer price figures, adding he did not forecast a rate cut this year.
• "The strong labour market and rapid wage growth mean that inflation won't return to Banxico's 2-4% tolerance band until late-2024," Tuvey said. "And with the Fed also continuing to strike a hawkish tone, we think that rate cuts in Mexico will not be delivered until early 2024." INEGI data also showed that annual core inflation, which strips out some volatile food and energy prices and has been a cause of concern for the central bank, slid to 6.91% in the first two weeks of June. Analysts polled by Reuters had expected it to hit 7.02%.

(Source: Reuters)

• U.S. banks are pushing to soften a major regulatory proposal to hike bank capital requirements, worried it could prove too onerous, especially for lenders still reeling from the March banking crisis, according to six people briefed on the matter.
• Bankers are particularly concerned by an aspect of the draft proposal that would apply higher capital charges on non-interest revenue, such as the fees lenders charge on credit cards or investment banking services.
• That capital charge is part of the package agreed upon by the Basel Committee in 2017, but the industry says it overstates the risk for banks that have a high proportion of non-interest income and had hoped U.S. regulators would mitigate its impact.
• Non-interest services income has been a key focus of many lenders' growth strategies in recent years, one industry official noted. American Express, Morgan Stanley and the U.S. units of UBS, Deutsche Bank and Barclays are among banks with a high proportion of non-interest income, according to a 2022 blog by Washington group the Bank Policy Institute.
• While the Basel rules were agreed upon years ago, the U.S. regulations to comply with them are being drafted in the wake of this year's banking crisis in which deposit runs caused Silicon Valley Bank and two other lenders to fail. The proposal is the first major rule led by Fed Vice Chair for Supervision Michael Barr, who has launched a sweeping review of capital rules and is expected to be tough on Wall Street.
• The proposal is also expected to apply stiffer capital rules to smaller lenders with over $100 billion in assets, which would include some that experienced liquidity problems this year, three sources said. Given investor jitters over the health of the industry and the broader economy, bankers say, hiking capital now could backfire, putting pressure on banks and hurting lending.

(Source: Reuters)

• The Bank of England raised interest rates by a bigger-than-expected half a percentage point on Thursday after it said there had been "significant" news suggesting British inflation would take longer to fall.
• The BoE's Monetary Policy Committee (MPC) voted 7-2 to raise its main interest rate to 5% from 4.5%, its highest since 2008 and its largest rate increase since February, following stickier inflation and wage growth since its policymakers met last in May.
• "There has been significant upside news in recent data that indicates more persistence in the inflation process," the MPC said. "Second-round effects in domestic price and wage developments generated by external cost shocks are likely to take longer to unwind than they did to emerge," it added.
• Expectations for BoE rate tightening have surged in recent days - sharply raising the cost of new mortgages - and before Thursday's decision financial markets expected the BoE's Bank Rate to peak at 6% by the end of the year. By contrast, economists polled by Reuters last week saw a 5% peak.
• The BoE retained its previous guidance on future policy, which stated that if there were to be evidence of more persistent pressures, then further tightening in monetary policy would be required.
• The central bank also noted that short-dated British government bond yields had risen sharply - pricing in an average level of Bank Rate of 5.5% for the next three years. The BoE said it would keep a close eye on the impact on mortgage costs, as well as rising costs in Britain's rental market.

(Source: Reuters)

• A Tourism Economic Impact Study will be conducted to identify the economic, fiscal, social and environmental impact of developing an additional 15,000 to 20,000 hotel rooms to augment Jamaica’s existing stock. This exercise will be spearheaded by the Ministry of Tourism, Portfolio Minister, Hon. Edmund Bartlett, announced as he closed the 2023/24 Sectoral Debate in the House of Representatives on Tuesday (June 20).
• He said the study’s objectives are to identify and evaluate the potential impact of the proposed developments on the gross domestic product (GDP); foreign exchange earnings; investment; government revenue and expenditure; income and employment (direct and indirect); and key related sectors such as agriculture, construction, manufacturing and entertainment
• The study is also intended to identify and evaluate the potential impact of the proposed developments on infrastructure needs; the environment; and individuals (particularly concerning housing, transport, and recreation); as well as provide recommendations to mitigate potential negative impacts while capitalizing on positive effects, as well as a credible, rigorous evidence base to inform public awareness of the value of the tourism industry to Jamaica.
• Tourism has been one of the main drivers of growth over the years in the Jamaican economy, contributing about 29.1% in 2019 (pre-pandemic) to GDP. It has also been one of the key drivers of economic recovery in the post-pandemic environment. However, there is still room to improve on the current tourism product and diversify offerings to unlock more benefits for the economy.

(Source: JIS News)

• The Agri-Linkages Exchange (ALEX) portal has generated earnings of $325 million for farmers during the first five months of 2023. Minister of Tourism, Hon. Edmund Bartlett, made the disclosure as he closed the 2023/24 Sectoral Debate in the House of Representatives on Tuesday (June 20).
• ALEX, which is a joint initiative of the Ministry, through the Tourism Enhancement Fund (TEF) and the Rural Agricultural Development Authority (RADA), is the first online platform of its kind in the country. It brings hoteliers into direct contact with the farmers and, in turn, reduces leakages and helps Jamaica retain more of the economic benefits of tourism.
• Bartlett noted that this significant accomplishment showcases the platform’s effectiveness in connecting farmers with potential buyers and creating prosperous opportunities.
• He noted that in the preceding year of 2022, the ALEX portal facilitated the sale of agricultural produce valued at $330 million, which not only highlights the platform’s success but also underscores the positive impact it has had on the livelihoods of 1,733 farmers and 671 registered buyers.

(Source: JIS News)

• Fitch Solutions projects Barbados’ fiscal balance will come in at a surplus of 1.1% of GDP in FY2023/24 (April 2023 through March 2024). Their forecast marks a significant improvement in the country’s public finances given its FY2022/23 balance estimate of -1.4%. 
• Despite no new tax measures, the surplus will be mostly driven by strong revenue growth underpinned by a continued recovery in economic activity. 
• The rebound in economic activity which is believed will continue throughout 2023 as tourist arrivals increase further will drive an increase in revenue intake. Revenues will grow by 11.0% in the current FY (up from 28.2% of GDP in FY2022/23 to 28.3% in FY2023/24).
• The government will also continue to take steps to improve the efficiency and administration of tax collection in the months ahead by, for instance, increasing audits and encouraging electronic tax filings.
• Nonetheless, government spending will grow at a slower rate as efforts – such as reducing capital expenditure – are made to keep the primary balance in surplus.
• In the medium term, Fitch believes that the government debt-to-GDP ratio will fall from 137.9% in 2021 to 77.9% by 2027 given contingency plans to eliminate risks of non-compliance with government targets as the government maintains a fiscally conservative posture.

(Source: Fitch Solutions)