• The International Energy Agency (IEA) forecasts a record-breaking global oil supply of 103.5Mn barrels per day (b/d) in 2024. Guyana leads the production surge alongside the United States, Brazil, and Canada, contributing to a collective increase of 1.5Mn b/d.
• Guyana produced 142.9Mn barrels of oil from the ExxonMobil-operated Stabroek block in 2023. Currently, its production stands at 550,000 b/d. By the end of March, the South American producer is expected to hit 600,000 b/d.
• Contrary to this trend, the Organization of the Petroleum Exporting Countries (OPEC) anticipates maintaining a steady supply, assuming the phasing out of voluntary cuts by the second quarter of 2024. 
• OPEC’s latest report projects demand for its crude to reach 28.5Mn b/d in 2024, marking a 0.8Mn b/d increase from 2023. Furthermore, it is forecasted to rise to 29Mn b/d in 2025, indicating a 0.5Mn b/d increment from the previous year.
• OPEC Secretary-General Haitham Al Ghais said, “Peak oil supply has never come to pass, and predictions of peak oil demand are following a similar trend. Given the growth trends, it is a challenge to see peak oil demand by the end of the decade, a mere six years away.” 
• Despite the geopolitical risks, oil and liquefied natural gas (LNG) production remains unaffected, yet ship owners are redirecting cargoes from the Red Sea. Hundreds of giant container ships, some more than 300m (984ft) long, are now choosing a lengthy detour around Africa instead of heading up the Red Sea and through the Suez Canal on voyages from Asia to Europe. 
• Rerouting such large vessels is no easy task; the logistics involved can be enormous and time-consuming, pushing fears that the crisis could have widespread economic impacts, pushing up prices of goods and delaying deliveries of high-value products by weeks or perhaps even longer.

(Sources: Oil Now & British Broadcasting Corporation)

• The Banco Central de Costa Rica cut its policy rate from 6.00% to 5.75% and signalled that further cautious easing was on the way at its January 18 meeting.
• This was the seventh-consecutive reduction by the bank and the third-consecutive 25bps cut, which brought total easing in the current cycle to 300bps.
• The bank’s statement acknowledged that the country has been in deflation for some time, though it flagged risks such as high domestic economic and wage growth and the potential for conflict in the Middle East to drive up oil prices. In addition, it reiterated that it intends to continue easing at a gradual and cautious pace.
• That said, Fitch expects the rate to drop to 4.50% by end-2024, as inflation remains below target through the year due to steady oil prices and moderating economic activity.
• However, risks exist in both directions. On the upside, the conflict in the Middle East could send oil prices higher. At the same time, to the downside, the central bank could opt for a more aggressive approach if domestic economic data deteriorates more quickly than expected.

 (Source: Fitch Solutions)

• Investors are attracted to local bonds from emerging markets, anticipating significant returns due to shifting monetary policies, particularly in the context of faster interest rate adjustments by central banks in developing economies.
• Latin American domestic bonds are experiencing a notable rally, with a 24% increase in a Bloomberg gauge of local-currency government debt, outperforming their dollar-denominated counterparts. Speculation about a potential Federal Reserve rate cut in the U.S. will drive further gains in 2024.
• While Latin American bonds excel, other regions, such as Europe, the Middle East, Africa, and Asia, have seen varied performance in their domestic debts and currencies. Some currencies, like the Turkish lira, Russian ruble, and South African rand, have underperformed, while others, like the Czech and Hungarian rates, show promise.
• Solid demand for local assets in emerging markets provides financing opportunities for governments and corporations. The trend includes increased issuance of domestic debt, reaching $1.5 trillion in the current year, with countries like China, South Korea, India, Brazil, Russia, Thailand, and Saudi Arabia leading in local primary markets.
• The outlook suggests continued growth in corporate activity in Mexico's domestic bond market and potential sovereign issuance leadership in the first half of 2024.

(Source: Bloomberg)

• The Bank of Canada has maintained its policy rate at 5.0% for the fourth consecutive meeting. It explicitly stated that further rate increases may not be necessary if the economy aligns with its forecasts.
• Policymakers, led by Governor Tiff Macklem, expressed concerns about stalled economic growth and foresee a slow near-term recovery. The bank's communication signals a shift towards discussions on how long to maintain the current restrictive policy stance, potentially leaving room for rate cuts. The Canadian dollar depreciated post-announcement, and bond yields decreased.
• The bank acknowledges the need to balance risks but removed previous statements indicating a readiness to hike rates. Inflation concerns persist, but officials emphasized the importance of sustained easing in core inflation.
• The Bank of Canada revised its economic growth projection to 0.8% for the current year, highlighting a modest excess supply in the economy.
• Inflation is expected to remain close to 3.0% in the first half of 2024, gradually declining to around 2.5% by year-end, with a target of 2.0% in the following year. However, risks include housing price increases impacting inflation.

(Source: Bloomberg)

• Seprod Limited disclosed that it received a Take-Over Bid Offer Circular from Musson Investments Limited (MIL), offering to purchase up to 13,948,000 ordinary shares in Seprod at a cash price of $78.00 per share. This follows Musson’s recent purchase of 1,630 shares on January 5th, bringing its total ownership of Seprod to slightly over 50%.
• The Board of Directors of Seprod has since appointed an Independent Committee consisting solely of directors not affiliated with MIL and its associates to review the Offer and propose a recommendation to shareholders.
• The Offer Circular outlined that the offer will open on January 24, 2024, and close on February 15, 2024, and also mentioned Musson’s intentions with respect to Seprod following the completion of the share purchase.
• Musson has explicitly declared that it does not intend to modify Seprod’s business, alter Seprod’s arrangements with its employees, change the emoluments of the directors of Seprod, or pursue the delisting of Seprod.
• Following this announcement, Seprod’s stock price decreased by 1.85% on January 23, 2024, closing at $82.56. At this price, the stock trades at a P/E of 22.71x earnings, which is above the Main Market Manufacturing & Distribution Sector Average of 14.90x.

(Sources: JSE & NCBCM Research)

• Jamaica is set to receive a substantial financial boost of approximately $255Mn through its participation in the International Monetary Fund’s (IMF) Resilience and Sustainability Facility (RSF). While an agreement has been reached at the staff level, it remains subject to approval by the IMF Executive Board at its meeting scheduled for February 2024. Once approved, the funds will become accessible to Jamaica.
• IMF recently completed its Article IV review for the year 2024, a significant milestone for Jamaica’s economic prospects. During this process, a dedicated team, led by Esteban Vesperoni, engaged in a series of meetings held in Kingston and conducted a virtual mission with Jamaican authorities from January 8 to 18.
• Commending Jamaica on its notable accomplishments, Esteban Vesperoni highlighted that over the last few years, the country has successfully reduced public debt, anchored inflation, and strengthened its external position. He further stated that “supported by strong revenues and strict control of non-wage spending, a prudent fiscal stance continues to support a reduction in public debt, which is expected to reach 72% of GDP in FY2023/24—the lowest in 25 years—well below pre-pandemic levels.”
• The IMF’s assessment highlights Jamaica’s substantial progress in executing its policy agenda, both under the Precautionary and Liquidity Line and the Resilience and Sustainability Facility. Notably, both facilities received approval from the IMF’s Executive Board in March 2023, with a combined access limit of approximately US$1.732Bn.
• Finance Minister Dr. Nigel Clarke emphasized the significance of the latest review, stating, “The IMF staff press release confirms that Jamaica’s economy is on firm footing and our economic programme is achieving its targets and objectives.”
• The highlighted indicators underscore the country’s strong economic position and commitment to sound financial management.

(Sources: IMF & Caribbean National Weekly)

• On January 15, 2024, the Senior Minister in the Office of the President with Responsibility for Finance, Dr Ashni Singh announced a $1.146Trn national budget for Guyana’s development in 2024. This has thus far been the largest budget in the country’s history, representing a 46.6% increase from the $781.9Bn 2023 budget.
• Notably, the oil and gas sector’s contribution to the country’s developmental thrust in 2024 will increase by 91.9% from the 2023 figure. This implies that while $125.1Bn from oil revenues supported the national budget in 2023, this year, $240.1Bn from the Natural Resource Fund will be used to cushion the trillion-dollar budget.
• The oil and gas industry has benefited the country’s economic development significantly, both by the direct increase in revenues through earnings from Guyana’s profit shares, as well as the economic boom that was triggered by the emergence of the sector.
• For context, from 2015, the year of the first oil discovery, to 2024, the national budget has increased by over 518% (the 2015 budget was $221Bn).
• Over the last several years, the increasing budget has resulted in tangible infrastructural benefits for Guyanese through the injection of oil revenues into infrastructural development, such as improved roads, healthcare facilities, and upgraded utilities. These transformative investments will continue to benefit the quality of life of Guyanese while also increasing the country’s investment prospects.
• Guyana is poised to become a major player in the global energy landscape, cementing itself as a beacon of progress and prosperity. With continued financial backing from the oil sector, the momentum is expected to continue throughout 2024.

(Source: CariCris)

• Fitch Solutions has marginally revised its 2024 growth forecast for Barbados from 2.9% to 3.1% on the back of a brighter US growth outlook, which will lift tourist arrivals and demand for goods exports.
• While this forecast still implies that real GDP growth will decelerate noticeably from its 2023 estimate of 6.3%, largely due to base effects. The economy is projected to have returned to its pre-pandemic size in 2023 and, as such, will no longer benefit massively from post-COVID normalisation going forward.
• That said, final consumption will continue to benefit from falling inflation, a low unemployment rate, and strong growth in public sector wages. Furthermore, the upward revision is underpinned by stronger-than-anticipated external demand from source countries (US and UK). 
• Risks to the growth projections for Barbados stem from the FY2024/25 budget – which is yet to be released, and dramatic changes to the US and UK growth outlooks.  

(Source: Fitch Solutions)

• Corporate debt defaults increased significantly in 2023, reaching 153 compared to 85 the previous year, marking an 80% rise. This trend poses a potential concern for 2024, as financially strained companies grapple with the challenges of high-interest rates, according to a report by S&P Global Ratings.
• A substantial portion of the defaults originated from low-rated companies facing negative cash flows, high debt levels, and weak liquidity. Consumer-facing industries, notably media and entertainment, played a prominent role in the increased default rate.
• Corporate debt in the United States has surged to USD 13.7 trillion, rising by 18.3% since 2020. This escalation occurred as companies took advantage of the Federal Reserve's interest rate cuts during the early stages of the Covid-19 pandemic.
• S&P Global Ratings anticipates further global credit deterioration in 2024, particularly for lower-rated entities ('B-' or below). The firm expects financing costs to remain high despite potential rate cuts. A significant portion of speculative-grade debt is projected to mature in 2025 and 2026, potentially contributing to a "corporate debt cliff."
• The economic slowdown and increased financing costs could lead to more widespread defaults, affecting sectors beyond media and entertainment, including consumer products, retail, and health care. Further, while Fed rate cuts are expected to provide some relief, elevated rates are likely to persist through 2024. Market expectations suggest a substantial cut in short-term rates, but Fed officials have hinted at a more gradual approach depending on inflation data.

(Source: CNBC)

• It is a close call whether the Bank of England starts trimming borrowing costs next quarter or in July-September, with only a slim majority of economists expecting it to do so before July as inflation falls towards its target. That is a turnaround from a December poll when more than two-thirds of respondents expected no move until at least the third quarter, as inflation is now seen falling faster.
• Inflation surged to a 41-year high of 11.1% in late 2022 and has proved tricky to tame even though the BoE raised interest rates 14 times from December 2021 to August 2023, taking the Bank rate to a 15-year peak of 5.25%.
• In December, inflation sped up for the first time in 10 months, rising to 4.0% from November's more-than-two-year low of 3.9%, denting market expectations for an early rate cut. The December poll indicates that the Bank of England (BoE) was initially expected to make its first interest rate cut in the third quarter, aligning with global trends seen in the U.S. Federal Reserve and the European Central Bank.
• Respondents, anticipating a Q2 cut, favour May over June due to its alignment with the second-quarter monetary policy report. Analysts, such as Marc Ostwald at ADM Investor Services, emphasize the importance of evaluating underlying economic trends.
• Inflation is projected to drop below target to 1.9% in the next quarter, providing the BoE with room to consider policy easing. The majority of economists foresee a Bank Rate reduction by the third quarter, aiming for 4.25% by year-end. The UK economy is expected to navigate challenges, with a forecasted growth of 0.1%-0.2% per quarter in 2024 and a more optimistic 1.2% growth in 2025.

(Source: Reuters)