• The Bank of England said on Tuesday that valuations for some financial assets may be too high, particularly for U.S. tech stocks and dollar-denominated corporate bonds. "The overall risk environment continues to be challenging and near-term growth prospects remain subdued," the BoE's Financial Policy Committee (FPC) said after a quarterly meeting.
• "Given the impact of higher interest rates, and uncertainties associated with inflation and growth, some risky asset valuations appear to be stretched," it added. The FPC judged Britain's banks and the wider financial system remained resilient, and it held banks' counter-cyclical capital buffer (CCyB) - a risk management tool - unchanged at 2%. "The FPC will continue to monitor developments closely and stands ready to vary the UK CCyB rate, in either direction, in line with the evolution of economic and financial conditions," it said.
• Some FPC members argued for an increase in the rate, to boost banks' resilience at a time when loan losses were low, and the case for cutting it was also considered, the BoE said. After last month's meeting of its Monetary Policy Committee (MPC), the BoE kept interest rates on hold for the first time since it began its tightening cycle in December 2021, leaving its main Bank Rate at 5.25%.
• Earlier on Tuesday, the International Monetary Fund downgraded its forecasts for Britain for next year, predicting growth of just 0.6% in 2024, the weakest of any major advanced economy. The BoE said it did not expect the debt-servicing burden on British households or businesses to return to higher levels seen on the eve of the global financial crisis in 2007, even with much of the impact of its run of rate rises still to be felt.
• However, it was keeping a close eye on the property market in Hong Kong and mainland China, to which some British lenders are exposed.

(Source: Reuters)

• Caribbean Information and Credit Rating Services Limited (CariCRIS) has upgraded the regional scale ratings of Supreme Ventures Limited (SVL or the Group) by one notch to CariA (Local Currency Rating) and CariA- (Foreign Currency Rating) and reaffirmed the Jamaica national scale ratings of jmAA- (Local Currency Rating) and jmA+ (Foreign Currency Rating).
• The regional scale local currency rating indicates that the level of creditworthiness of this obligor, adjudged in relation to other obligors in the Caribbean is good. The national scale local currency rating indicates high creditworthiness compared to other obligors in Jamaica.
• The one-notch upgrade on the regional scale ratings is attributed to the improvement in the credit risk profile of the sovereign over the last 12 months following the lifting of the coronavirus (COVID-19) pandemic restrictions.
• This resulted in consistent real gross domestic product (GDP) growth over the last four quarters, improved overall fiscal operations and a reduced debt to GDP estimated at around 77.9% as of March 2023, lower than 84.1% reported as of March 2022.
• The agency highlighted that the stable outlook is based on its expectation that the group’s financial performance in 2023, will continue its upward trajectory from its six-month performance underpinned by continued growth in the group’s core business, launch of new products, business expansion, and digitalization initiatives.
• Therefore, CariCris expects SVL to maintain its good profitability and debt-serving metrics over the next 12 to 15 months.
• Nonetheless, the ratings are tempered by the group’s high sovereign risk exposure which can present downside risks to SVL’s operations and earnings, notwithstanding improving economic conditions.
• Overall, a higher rating reinforces the creditworthiness of SVL. A better rating could translate into better credit terms should the company decide to raise additional debt in the near term.

(Source: CariCRIS Ratings)

• The Government’s Productive Inputs Relief (PIR) scheme has generated benefits totalling up to $1.4 billion for the period to date between 2021 and 2023.
• Minister of Industry, Investment and Commerce, Senator the Hon. Aubyn Hill, made the announcement during his contribution to the 2023/24 State of the Nation Debate in the Senate on Friday (October 6).
• The PIR scheme facilitates duty-free importation of specific items intended for productive use. It aims to spur an expansion of productive activities in these areas.
• Under the system, the Government has targeted specific sectors – agriculture, manufacturing, tourism, healthcare, and the creative industries – which are being leveraged to promote and stimulate economic growth.
• Companies operating in Jamaica can benefit from wide-ranging incentives, which are applied at two main stages – import duty and income tax relief.
• These incorporate, among other things, relief on Customs Import Duties, normally charged when importing goods into the country; additional Stamp Duties, usually applied at the port on certain products; and Corporate Income Tax, generally levied on the profit income of businesses.

(Source: JIS News)

• After posting weak 1.0% y-o-y growth in Q223, Fitch Solutions expects the Dominican economy to pick up in H223 due to a well-performing US economy, ultimately growing by 2.5% this year. This marks an upward revision from its previous forecast of 2.3%.
• Fitch forecasts that 2023 US real GDP growth will be 2.1% and that it will continue to perform well through mid-2024, which will fuel demand for Dominican goods and services exports.
• Notably, Dom Reps tourism sector – approximately 15% of headline GDP – is heavily fueled by US nationals, who make up over one-third of total tourist arrivals. 
• Additionally, US consumer demand will also drive the Dominican manufacturing sector; in 2022, around 55% of Dominican exports were destined for the United States, predominately medical and electrical equipment and machinery. This is likely to bring down unemployment from its current level of 5.6% and increase consumer spending
• Fitch expects that the Dominican economy will report faster growth in 2024 at 2.7%, though the agency believes it will slow in H224 as the US enters a mild recession.
• Risks to Fitch’s forecast are tilted towards the upside, as the US recession may be more moderate than expected, which would lead to continued US consumer spending that would benefit the Dominican economy.

(Source: Fitch Solutions)

• As expected, after the Banco Central de Reserva del Perù (BCRP) began its cutting cycle on September 14, there was an additional 25bps cut on October 5, bringing down the policy rate to 7.25%.
• This followed a dramatic fall in inflation in September, with headline CPI growth falling from 5.6% to 5.0%. Core inflation has likewise seen a sharper decline of 3.0% in September compared to 3.8% in August.
• However, the sharper slowdown in inflation can be partly attributed to the downturn in growth that Peru has been experiencing. Peru’s economic growth has remained constrained amid ongoing political- and weather-related headwinds which have resulted in the GDP forecast for 2023 being revised down from 1.8% previously to 0.6%
• Fitch Solutions anticipates that the BCRP will cut rates by another 25bps at the next meeting on November 9. Fitch believes that the rate will end the year at 6.75% and reach 4.50% by end-2024, as inflation has been falling sharply due to a slowdown in growth.
• Risks to the 2024 forecast remain high, as Fitch thinks end-2024 rates may be higher due to supply shocks such as El Niño and political protests.

(Source: Fitch Solutions)

• Oil prices surged by over 4% due to the Israel-Hamas conflict entering its third day after a surprise attack by Hamas on Israel. Global benchmark Brent rose by 4.2% to $88.15 a barrel, and U.S. West Texas Intermediate increased by 4.3% to $86.38 per barrel, marking the largest one-day gain since April 3.
• Hamas initiated a multi-pronged infiltration into Israel using various means, following numerous rockets fired from Gaza into Israel. At the time, at least 700 Israelis and 313 Palestinians have reportedly died in the conflict.
• Analysts view the surge in crude prices as a likely temporary and knee-jerk reaction. The conflict doesn't directly threaten major oil supplies, as neither Israel nor Palestine are significant oil producers. However, the conflict is near a key oil-producing and exporting region, raising concerns about potential impacts on global oil markets.
• Iran's oil supply is a major concern, especially if linked to the conflict, potentially affecting oil exports and prices. Ongoing geopolitical tensions pose a risk of spillover and escalation in the region, potentially affecting oil supply and prices.
• The Strait of Hormuz, a crucial oil transit chokepoint, could be impacted if the conflict involves Iran, potentially leading to a significant increase in oil prices.

(Source: CNBC)

• IMF states that about 5% of global banks are vulnerable to stress with prolonged higher central bank interest rates. A further 30% of banks, including major ones, could be vulnerable during a period of low growth and high inflation ("stagflation").
• The assessment is based on a new global stress test applied to 900 lenders in 29 countries after the recent collapses of major banks. Tobias Adrian, IMF's director, highlights the weak tail of banks in many countries and emphasizes the need for strong regulatory oversight and increased bank resilience.
• The report emphasizes the importance of proactive and intrusive supervision by governments and regulators and advocates for timely corrective actions.
• The IMF calls for urgent efforts to enhance bank resilience by boosting capital levels. The warning comes amidst gatherings of global financial leaders in Marrakech, Morocco, for the IMF and World Bank annual meetings.
• Recent U.S. Federal Reserve interest rate hikes resulted in losses on government bond portfolios for regional U.S. banks, leading to subsequent failures.
• The report suggests that weak banks experience a decline of more than five percentage points in capital levels or fall below a floor of 7%. Under baseline conditions, 55 banks (4% of global assets) were identified as weak, rising to 215 banks (42% of assets) in the stagflation scenario.
• The IMF recommends central banks maintain higher rates until inflation subsides and warns against premature easing of monetary policy based on historical caution. The U.S. Federal Reserve is expected to continue raising rates to manage inflation, signalling another hike before the end of the year and potential rate levels above 5% by 2024.

(Source: Reuters)

• General Accident Insurance Company is looking at opportunities to expand regionally. Managing Director of General Accident Sharon Donaldson says this was a big part of the company's decision to move up to the main market of the Jamaica Stock Exchange.
• The move will provide the company with the opportunity to raise more capital, especially equity capital so that the company can continue with its expansion.
• The company is also looking to go completely online as part of that expansion, so the insured will have a frictionless experience, one such that customers should be able to take out an insurance policy for their car or their home, get a printout of their documents without the hassle of going into a physical location.
• This will enable GENAC to expand its reach, thereby generating more revenues and doing so in a more efficient way which saves cost and bolsters the bottom line.

(Source: RJR News)

• Tourism Minister, Hon. Edmund Bartlett, says the development of new highways across Jamaica will reduce travel time for tourists and increase opportunities within the sector.
• Jamaica will now have infrastructure for land and road communication, the likeness of which has never been seen before. Prime Minister Andrew Holness’ announcement regarding further expanding the road network into Negril will significantly reduce travel time.
• The Montego Bay bypass, which is slated for construction, would enable persons to travel directly to Negril from Montego Bay without going through Lucea, Hopewell and Sandy Bay, which would significantly change the game.
• Bartlett further indicated the buildout of St. Thomas as a brand-new tourism destination is being powered by the southeastern highway, which the Prime Minister will open soon.

(Source: JIS News)

• The International Monetary Fund (IMF) on Tuesday, October 3, significantly raised its 2023 growth forecast for Mexico to 3.2% from a 2.6% forecast issued in July, citing strength in private consumption, services, construction and automotive production. The IMF also raised its 2024 growth forecast for Mexico to 2.1% from 1.5% in July.
• The new forecasts indicate continued economic strength in North America as the IMF prepares to release a new update to its World Economic Outlook global growth forecasts next week during annual meetings in Morocco.
• The IMF said Mexico's expansion was broad-based, with record-low unemployment and record-high manufacturing capacity utilization rates. Mexico has a significant opportunity to capture "nearshoring" of U.S. supply chains due to deep trade links to its northern neighbour.
• "However, capitalizing on this potential and competing with other production locations will require addressing Mexico’s long-standing structural challenges while continuing to pursue prudent macroeconomic policies," the IMF said. "This will require higher and better-targeted public investment, better governance, increasing access to domestic sources of finance, increasing female labour force participation, and pivoting consumption toward cleaner sources of energy," it added.
• That being said, the Fund added that the planned 2024 budget was "unduly procyclical," with increased spending on pensions, wages and flagship investment projects compounded by revenue pressures, for a projected deficit of 5.4% of GDP. It said this "will boost demand at a time when the economy is operating above potential and inflation is not yet back to the central bank's target."
• The IMF said this added growth pressure will likely lead to a higher path for interest rates, a stronger currency, a higher debt-to-GDP ratio and a slower decline in inflation.

(Source: Reuters)