• The International Monetary Fund on Tuesday raised its 2022 economic growth forecasts for Latin America (Latam) and the Caribbean and lowered its growth projection for 2023 on shifting commodity prices and external financing conditions.
• The IMF lifted its growth estimate for this year to 3.5% from the 3.0% forecast in July, but its projection for global output growth this year was unchanged at 3.2%. In the region, Brazil is seen growing 2.8% this year, a 1.1pp increase from the July estimate, while Mexico is seen growing 0.3pp slower at 2.1%.
• For next year, the IMF's projection for output expansion in Latam and the Caribbean was lowered by 0.3pp to 1.7%. Globally, the figure dropped from 0.2pp to 2.7%.  This year's improved regional forecast rests on "stronger-than-expected activity in the first half of 2022 on favourable commodity prices, still-favourable external financing conditions, and the normalization of activities in contact-intensive sectors.
• However, growth in the region is expected to slow in late 2022 and 2023 as partner country growth weakens, financial conditions tighten, and commodity prices soften. The World Bank projections showed Latam and the Caribbean regional economic output growing by 3% this year and slowing to 1.6% in 2023, a growth rate described as “insufficient to significantly reduce poverty”.
• Inflation continues to be a concern across developed and emerging markets, according to the IMF's outlook. For emerging and developing economies, the fund sees inflation rising to 9.9% in 2022 from 5.9% in 2021, before declining to 8.1% next year. Consumer prices are projected to end the year up 14.6% and expected that rate to slow to 9.5% next year.
• Importantly, the 2023 revision to the inflation forecasts for Latin America and the Caribbean, up by 2.2 percentage points, was the largest for any region.

(Source: Reuters)

• Moody’s has doubled down on concerns that The Bahamian Government’s Budget revenue forecasts are “overly optimistic” and that its debt servicing payments will be higher than projected due to the rise in global interest rates.
• The credit rating agency, fresh from downgrading The Bahamas deeper into ‘junk’ status over concerns the Government may be unable to access the debt financing it requires, also suggested that the Davis administration’s plans to restrain public spending “will weigh on growth” and thus slow down economic expansion.
• The economic recovery is a key driver of fiscal consolidation in fiscal year 2023. A continued uptick in tourism inflows will drive the recovery at the same time as construction and foreign-led investment projects ramp up. These factors, in addition to increased tax collection supported by the re-introduced Revenue Enhancement Unit, underpin the Government’s expectation that recurrent revenue will expand by 14.1% in fiscal year 2023
• However, the Ministry of Finance last week suggested the Moody’s downgrade, which was based on fears that The Bahamas’ access to borrowing is being squeezed, is not warranted because the Government’s borrowing plan for the 2022-2023 fiscal year shows it is aiming to avoid the global bond markets over the next nine months due to the adverse high-interest rate environment it would face.
• Nevertheless, Moody’s noted that “assuming that the tourism sector carries this momentum through the upcoming peak season, economic activity will continue to pick up. We forecast real GDP growth of 7% in 2022. Although the sector’s recovery, which will support the broader economy’s growth, is subject to risks of inflation in tourism source markets and a potential outbreak of a new coronavirus variant, we expect inflows to continue to converge with their pre-pandemic levels in the remainder of 2022.”

(Source: The Tribune)

• The average interest rate on the most popular U.S. home loan rose to its highest level since 2006 as the housing sector continued to bear the brunt of tightening financial conditions, data from the Mortgage Bankers Association (MBA) showed on Wednesday.
• Mortgage rates have more than doubled since the beginning of the year as the Federal Reserve pursues an aggressive path of interest rate hikes to bring down stubbornly high inflation.
• Those actions, designed to cool the economy sufficiently to curb price pressures, have weighed heavily on the interest-rate-sensitive housing sector as expectations for Fed tightening have led to a surge in Treasury yields. The yield on the 10-year note acts as a benchmark for mortgage rates.
• The average contract rate on a 30-year fixed-rate mortgage rose by 6 basis points to 6.81% for the week ended Oct. 7 while the MBA's Market Composite Index, a measure of mortgage loan application volume, fell 2.0% from a week earlier and is down roughly 69% from one year ago.

(Source: Reuters)

• Britain's government must ensure that its tax cuts and higher spending do not threaten the public finances over the long term or the effectiveness of the Bank of England, the central bank's chief economist, Huw Pill, said on Wednesday.
• The BoE was forced to intervene in Britain's government bond market on Sept. 28 after prices slumped, threatening a fire sale of assets by pension funds which had been caught out by the speed of the move.
• While bond yields have risen globally all year, the sharp slump came immediately after finance minister Kwasi Kwarteng's first fiscal statement, which lacked the usual independent forecasts and included 45 billion pounds ($49.7 billion) of unfunded tax cuts.
• Pill said that while the energy support package - which will cost 60 billion pounds over the next six months - did reduce some short-term inflation risks and economic dangers, it also added to inflation pressure in the medium term and put pressure on the public finances.

(Source: Reuters)

• Fitch anticipates that historically high inflation will continue coming down in Jamaica, relieving the pressure on households and supporting social stability.
• Inflation has already fallen from a high of 11.8% y-o-y in April, to 10.2% in August, and it is further expected that inflation will slow to 8.6% by end-2022 and 4.8% at end-2023, mainly due to falling commodity prices.
• On the other hand, employment, which has been bolstered by a recovering tourism sector, will contribute further to Jamaica’s stability. Consequently, the unemployment average is expected to come in at 6.8% in 2022 and 7.0% in 2023, down from 8.4% in 2021.
• Jamaica’s ‘social stability’ component has come up significantly, from 45.0 to 52.5 out of 100 due to the aforementioned fall in inflation and rebound in employment. As such Fitch revised the country’s overall score in its Short-Term Political Risk Index (STPRI) from 69.2 to 72.7 out of 100.
• Nevertheless, longer-term risks to social stability come from the government’s commitment to fiscal consolidation, and possible lack of additional fiscal support in the event of an economic downturn.

(Source: Fitch Solutions)

• Guyana’s oil-and-gas sector has already contributed significantly to the economy through increased revenues, consequently, the oil sector GDP is expected to grow more than 100% this year, with roughly 30% average growth continuing for most of the decade according to the IMF.
• However, diversification in other non-oil sectors and government investment in innovative policies will be key elements for driving sustainable growth. The IMF foresees that, over the next five years, Guyana will continue to see significant growth in its non-oil economy, with non-oil sectors accounting for 32% to 40% of total GDP, from 2022 through 2027.
• The report added that non-oil GDP growth is expected to average 5% per year, while inflation is set to ease, thanks to more stable projected international food and fuel prices.
• This year, the country’s sugar and rice industries started to recover after a series of floods hampered those industries. Sugar and rice cultivation, alone, are projected to grow by almost 12% and 25% respectively, according to the government’s projections.
• These improvements will go a long way in encouraging investments in regional agriculture to reduce the regional food-import bill by 2025. Furthermore, this level of investment and development in Guyana is an important indicator of the government proactively working to avoid the resource curse and Dutch Disease early in its oil-producing history.

(Source: Guyana Chronicle)

• Fitch Solutions has forecast that the Panamanian fiscal deficit will narrow from 6.7% of GDP in 2021 to 5.1% in 2022 and 4.2% in 2023, due to rising revenues stemming from growing tax and Panama Canal earnings, and fiscal consolidation measures enacted by President Laurentino ‘Nito’ Cortizo. 
• Prior to the COVID-19 pandemic, Panama ran modest fiscal deficits averaging 2.1% of GDP from 2015-2019. After running a record fiscal deficit of 10.2% of GDP in 2020, the government has seen a rebound in revenues and has limited expenditure growth.
• In 2022, the post-pandemic economic rebound is expected to continue and will support 10.5% revenue growth, while the government implements austerity measures that will limit expenditure growth to 3.4%. Consequently, Fitch forecasts that the Panamanian economy will grow 7.0% in 2022, reaching 2019 GDP levels and driving higher sales and income tax growth than last year. 
• However, while tax revenue growth will ease with slowing economic growth in 2023, revenue growth will be sustained by higher expected profits from the Panama Canal, underpinning Fitch’s view that revenues will grow to 7.9%. 
• On the expenditure side, the government will attempt to strike a balance between getting closer to compliance with the country’s Fiscal and Social Responsibility Law (FSRL) and maintaining some social spending, to address the cost-of-living crisis which has led to nationwide protests and demonstrations. This will support total expenditures growth of 3.5% in 2023.

(Source: Fitch Solutions)

• British finance minister Kwasi Kwarteng, fresh from sowing turmoil in financial markets with a plan for big tax cuts, heads to Washington this week with International Monetary Fund criticisms of his new policy direction ringing in his ears.
• Kwarteng is due to attend the IMF's semi-annual meeting of global policymakers for the first time since being put in charge of Britain's economy by Prime Minister Liz Truss and tasked with delivering on her promises of ending policy-making "orthodoxy".
• On Sept. 23, Kwarteng made his first fiscal announcement including a controversial plan to scrap Britain's top income tax rate for the highest earners, part of a package of measures he said would speed up sluggish economic growth.
• But the IMF took the rare step of criticising the proposals, saying they could worsen inequality and work at cross-purposes with the Bank of England's drive to tame surging inflation which is the highest among the Group of Seven rich nations.
• In a nod to concerns about the impact of his plans on Britain's public finances, Kwarteng announced on Monday he was bringing forward the date for announcing his medium-term budget plans and independent forecasts on how much they would cost.
• BoE Governor Andrew Bailey is also due to attend the IMF meetings this week, from where he will watch how investors react to the central bank's newly expanded measures to calm financial markets after the turmoil sparked by Kwarteng last month.

(Source: Reuters)

• China's services activity in September contracted for the first time in four months, as COVID-19 restrictions dented already fragile demand and dimmed business confidence, a private-sector business survey showed on Saturday.
• The Caixin services purchasing managers' index (PMI) fell to 49.3 from 55.0 in August as COVID containment measures disrupted supply and demand and restricted national travel.
• An official survey published last week also showed services activity slowing, although its reading remained slightly above the 50-point mark that separates growth from contraction on a monthly basis. China's economy showed signs of improvement in August with faster-than-expected growth in factory output and retail sales but is being held back by protracted COVID curbs and a worsening property slump.
• The Caixin survey showed services companies are grappling with sluggish demand, shrinking production and rising costs, although foreign orders are recovering. The new business sub-index registered the first drop in four months in September, of which the new export business expanded for the first time since December 2021. Input prices have risen every month since June 2020, the sub-index showed, mainly driven by higher raw material and labour costs.
• That led services firms to reduce their payrolls at a sharper rate, with a sub-index for employment at 48.5, in contraction territory for the ninth straight month and down from 48.9 in August. With few signs COVID containment measures will ease in the near term, the market was much less optimistic.

(Source: Reuters)

• Minister of Tourism, Hon Edmund Bartlett has announced that Jamaica has earned US$5.7Bn since reopening its borders in June 2020. The data also shows that the island welcomed over 5Mn visitors over the same period. According to arrivals figures, the announcement follows the destination’s strong tourism recovery efforts that resulted in its best summer ever.
• Since reopening in June 2020, the island has welcomed approximately 5,173,000 visitors, including stopover arrivals and cruise passengers. Tourism is a key driver in the overall economic recovery for Jamaica, as such, the improvement in tourist arrivals augurs well for the economy, lives and livelihoods.
• Earnings from tourism are expected to return to pre-pandemic levels by end-2022 while arrivals should return to 2019 levels by end-2023 and this performance will be boosted by strong investments in the sector and the return of robust cruise demand.
• The island was one of the first destinations to reopen amidst the global coronavirus pandemic through its robust health and safety protocols and World Travel and Tourism Council-approved resilient corridors. These innovative approaches allowed for the safe reopening of borders and travel and tourism activities.

(Source: Caribbean News Now)