• Global debt hit a record $307 trillion in the second quarter of the year despite rising interest rates curbing bank credit, with markets such as the United States and Japan driving the rise, the Institute of International Finance (IIF) said on Tuesday.
• The financial services trade group said in a report that global debt in dollar terms had risen by $10 trillion in the first half of 2023 and by $100 trillion over the past decade. It said the latest increase has lifted the global debt-to-GDP ratio for a second straight quarter to 336%.
• Prior to 2023, the debt ratio had been declining for seven quarters. Slower growth, alongside a deceleration in price increases, was behind the debt ratio rise, the report said. "The sudden rise in inflation was the main factor behind the sharp decline in debt ratio over the past two years," the IIF said, adding that with wage and price pressures moderating, even if not to their targets, they expect the debt to output ratio to surpass 337% by year-end.
• More than 80% of the latest debt build-up had come from the developed world with the U.S., Japan, Britain and France registering the largest increases. Among emerging markets, the biggest rises came from the largest economies, namely China, India, and Brazil. "As higher rates and higher debt levels push government interest expenses higher, domestic debt strains are set to increase," the IIF said.

(Source: Reuters)

• For August 2023, The All-Jamaica Consumer Price Index (CPI) increased by 1.0% for August 2023 influenced mainly by a 1.4% rise in the index for the division ‘Food and Non-alcoholic Beverages’
• The increase in food prices was due largely to a 4.0% increase in the index for the class ‘Vegetables, tubers, plantains, cooking bananas and pulses’. Drought conditions continued to adversely affect the supply of agricultural produce resulting in higher prices for some items.
• The inflation rate for the month was also influenced by a 5.2% increase in the index for the division ‘Information and Communication’, due to higher rates for mobile communication services.
• Additionally, there was a 0.8% rise in the index for the division ‘Housing, Water, Electricity, Gas and Other Fuels’, resulting from increased rates for electricity, water and sewage and a 1.0% rise in the index for the ‘Transport’ division due to higher petrol prices.
• The point-to-point inflation rate (August 2022 – August 2023) was 6.8%. The divisions ‘Food and Non-Alcoholic Beverages' (10.9%), ‘Restaurants and Accommodation Services’ (12.0%) and ‘Furnishings, Household Equipment and Routine Household Maintenance’ (11.1%), were the largest contributors to this increase. Tempering these increases, however, was a fall of 1.2% in the index for the 'Transport' division.
• All classes within the ‘Food and Non-Alcoholic Beverages' division increased for the August 2022 - 2023 period. The key contributor was the class ‘Vegetables, tubers, plantains, cooking bananas and pulses’, which rose by 30.2% as a result of continued drought conditions. The index for the class, ‘Cereals and cereal products’ increased by 5.1%, due to higher prices for bread, flour and rice. Increased prices for other meat products such as chicken, turkey neck, corned beef and other meat products, contributed to the 4.1% rise in the index for ‘Meat and other parts of slaughtered land animals’.
• The increase in the index of the ‘Restaurants and Accommodation Services’ division was attributable to higher prices for food. The index for the division ‘Furnishings, Household Equipment and Routine Household Maintenance’ was largely impacted by the upward movement in the increase in the National Minimum Wage for Jamaica on June 1, 2023.
• Moderating these increases was a fall in the index for the ‘Transport’ division due to lower prices for petrol products over the 1 year. The class 'Fuel & lubricants for personal transport equipment' declined by 10.2% for this review period.
• On August 29, 2023, the BOJ held its monetary policy meeting, where it was deemed appropriate to maintain the policy rate at 7.00% and watch the pass-through effects on deposit and loan rates. Despite inflation inching up over the past few months, point-to-point inflation is anticipated to continue to fall and subsequently enter the BOJ’s target range of 4.0% to 6.0% by the December quarter. The next policy decision will be on the 29^th of September, where it is expected that BOJ will continue holding the policy rate at 7.00%.

(Source: STATIN)

• Brazil will end a tax exemption for importing electric vehicles, gradually raising the duty to 35% over three years, Industry Ministry official Uallace Moreira told Reuters last Friday.
• Brazil-based carmakers lobbied for the measure, overcoming pushback from Chinese manufacturers who sell electric vehicles in the country. However, the final details are still being debated, and its timing will be decided by Industry Minister and Vice-President Geraldo Alckmin, Moreira said.
• "What can we do to stimulate local production? Make imports a little more difficult or more expensive," Moreira said, arguing that several countries have adopted protectionist policies in this sector.
• Moreira said the tariff will be implemented gradually, so as not to create a shock in the market, and will be in line with the government's plan to increase private investment in green technology.
• He also said the government will issue a temporary measure within 15 days to launch the second phase of its "Rota 2030" programme, aimed at increasing efficiency in the automotive sector, which will be renamed the "Green Mobility Programme".
• The new programme will stimulate energy efficiency projects using tax credits, as well as create a mechanism that Moreira called "green taxation." The plan would stagger the collection of a tax on industrialized products, depending on the energy efficiency of the vehicle models, the recyclability of the products and local production density.

(Source: Reuters)

• After restarting its rate-cutting cycle in August with a 25 basis point reduction to 7.50%, Fitch Solutions expect that the Banco Central de la República Dominicana (BCRD) will proceed cautiously, cutting to 6.75% by end-2023 and 5.00% by end-2024.
• According to the post-meeting minutes, the previous month’s pause was due to improving economic outlooks for the US and Latin America and the US Federal Reserve’s 25 basis point hike earlier that month. For the August meeting, the central bank’s monetary board cited the broad decline in international prices for commodities like oil and food, as well as materials for manufacturing. 
• Additionally, both headline and core inflation have shown a sustained decline since Q322 towards the central bank’s inflation target range of 4.0% (+/- 1.0%), although headline inflation ticked up slightly from 3.9% in July to 4.3% in August.
• Given this, Fitch expects to see a bit of reflation later in the year and 2024 due to currency depreciation and rising commodity prices, which underpins its forecast of 4.5% y-o-y inflation by end-2023 and 4.4% average in 2024.
• Risks to Fitch’s interest rate forecast are balanced as stronger US and DR economies could prompt the BCRD to temper policy loosening, while a deeper US recession in 2024 could pose headwinds for the DR economy, pressuring the bank to cut rates to stimulate growth.

(Source: Fitch Solutions)

• U.S. Federal Reserve officials, who have tentatively embraced the possibility they can squelch inflation without a recession, meet this week with an autoworkers strike, a possible federal government shutdown, and a student loan squeeze on consumers posing new risks to that best-case outcome.
• The United Auto Workers launched a strike against all three major automakers on Friday with an initial walkout of around 13,000 employees at three plants, but those numbers could grow. Federal elected officials have only until Sept. 30, when current spending authorizations expire, to come up with a deal or federal agencies will have to shutter, and congressional Republicans have stymied negotiations.
• With the economy already expected to slow over the final months of the year, prolonged disruptions in the auto industry and at federal agencies could have unpredictable results: Sapping consumer spending, possibly pushing up car prices in a blow to the Fed's inflation fight, and producing the sort of knock to business and consumer confidence that could spell the difference between a "soft landing" and a downturn.
• With millions of consumers also facing the renewal of student loan payments in October that will divert from other spending, Goldman Sachs economists have tempered their generally bullish outlook with warnings of a fourth-quarter "pothole" that could knock more than a percentage point from gross domestic product growth.
• Over recent months’ economic data has generally worked in the Fed's favour, with inflation ebbing even as the economy continues to grow above trend and add a healthy number of jobs each month. However, shutdowns of two major sectors - with potentially as many as 146,000 auto workers striking and perhaps 800,000 federal employees without paychecks - will chip away at growth and confidence every week they continue.

(Source: Reuters)

• Citi is upgrading some of its services for institutional clients using blockchain technology. The banking giant introduced Citi Token Services on Monday, which will tokenize clients’ deposits so they can be sent anywhere in the world instantly.
• If you’re a large multinational client where you have multiple bank accounts in multiple different regions across borders and you keep buffers of cash in each of these regions, it’s really an inefficient use of cash,” Ryan Rugg, Global head of digital assets for Citi’s Treasury and Trade Solutions business, said. With the new service, “if it’s 5:00 p.m. in the U.S. and 5:00 a.m. in Singapore, but you need to get money there, you can send that immediately, within seconds.”
• The bank is also now using smart contracts to automate the trade process. Smart contracts are self-executing programmes that run automatically when the conditions of an agreement or contract are met.
• Citi tested the smart contract capability with shipping and logistics giant Maersk, a client of the bank. Rugg explained how the company pre-funded a smart contract with digitized tokens. Once the company had received agreed-upon services from a canal authority, the token was automatically paid out. Citi’s service could reduce transaction processing times from days to minutes, Rugg said.
• While crypto remains in regulatory limbo and prices have been almost stagnant this year, renewed excitement about tokenizing real-world assets using blockchain technology has emerged as one of the hottest topics of the year. Bernstein has said financial incumbents who want to be part of the modernization of financial markets need to be using blockchain technology, and that it sees about $5 trillion of real-world financial assets being tokenized on blockchains over the next five years.

(Source: CNBC)

• Standard and Poor's (S&P) Global Ratings upgraded its long-term foreign and local currency sovereign credit ratings on Jamaica to 'BB-' from 'B+', and affirmed its short-term foreign and local currency sovereign credit ratings at 'B'. The outlook remains stable.
• The stable outlook reflects the expectation that Jamaica will continue to pursue cautious macroeconomic policy and maintain its commitment to prudent public sector finances and debt reduction.
• S&P assumes that small fiscal surpluses will sustain a decline in debt over the next one to two years. Furthermore, the agency expects that tourism will continue to support external balances and GDP growth.
• Jamaica remained committed to meeting its ambitious debt reduction targets during the pandemic and remains committed to debt reduction and prudent public finances. After eroding in 2020, the country's debt-to-GDP balance is trending down to new historical lows, supported by a return of fiscal surpluses and a growing economy.
• The agency expects the government will report a small surplus in the current fiscal year (ending March 31, 2024), of J$10 billion, or 0.3% of GDP, similar to the surplus in the previous fiscal year. Further, there is an expectation that the average annual change in net government debt will be 0.8% over the next three to four years, reflecting future surpluses as well as the negative effect of a likely depreciating Jamaican dollar on the value of the country's large external debt.
• Jamaica's net debt to GDP is falling and reached a historical low of 64% in 2022. It is believed that this ratio will continue to decline, to just below 60% by the end of 2024. The government's interest burden remains high but is also decreasing. The agency expects that it will fall modestly to 17.5% of government revenues in fiscal 2024 and to less than 15% by 2026. The government estimates its financing needs will be J$139 billion this year, and S&P expects it will meet them through a combination of predominantly concessionary multilateral funding and domestic borrowing.
• While the outlook is stable, the agency could further upgrade the ratings over the next two years if Jamaica's trend economic growth rate rose consistently and converged with that of peers at a similar level of economic development. That, along with continuity in fiscal policy, would increase the sovereign's economic resilience. Equally, the agency could lower the ratings during the next two years if it believed a changing fiscal policy would lead to sustained deficits, reversing debt reduction and resulting in a persistently higher debt burden; or if the economy fails to perform as expected, weakening the country's external position.

(Source:  S&P)

• The Listing Committee of the JSE approved FosRich’s application for a supplemental listing of 55,729,647 ordinary stock units (the New Ordinary Shares) that were issued according to the Company’s Rights Issue.
• The New Ordinary Shares will commence trading on Friday, September 15, 2023.
• Accordingly, commencing from Friday, September 15, 2023, the total issued ordinary stock units of FOSRICH listed on the JSE’s Junior Market will increase to 5,078,485,197.
• FosRich’s successful raise of $139Mn from the rights issue will be instrumental in completing phase two of its 30,000-square foot fulfilment centre on Molynes Road.

(Source:  JSE)

• Fitch Solutions estimates real GDP growth slowing from 5.9% in 2022 to 2.0% in 2023 in Grenada, owing partially to a high statistical base.
• In 2023, despite the impact of base effects, Fitch expects that economic activity was supported by a strong recovery in the tourism sector, as well as easing global commodity prices following a spike in prices caused by Russia’s invasion of Ukraine in February 2022.
• It is also forecasted that real GDP growth will accelerate to 3.0% in 2024, driven mainly by the recovering tourism sector and improving financial conditions for households.
• Furthermore, Grenada will remain among the most politically stable countries in the Caribbean region in the coming years, as reflected by its high score of 80.6 (out of 100) in its Short-Term Political Risk Index.
• The country will continue benefiting from a stable path of political policymaking and policy continuity, while social stability will benefit from the improving economy and tourism sectors.
• Nevertheless, the country’s weak fiscal position and limited ability to attract overseas investment outside the tourism sector will prevent faster rates of GDP growth.

(Source: Fitch Solutions)

• The Brazilian government expects cuts of at least 50 basis points in the central bank's benchmark interest rate over the remaining three meetings this year, aiming to end 2023 with the rate below 12%, Planning Minister Simone Tebet said on Tuesday.
• The Selic rate stands at 13.25% after the central bank embarked on an easing cycle last month with a half-percentage-point reduction, marking the end of nearly a year of holding rates steady to combat high inflation. The next monetary policy decision is scheduled for Sept. 20.
• Policymakers have consistently stressed that the central bank will keep the 50 basis point rate cut pace, with eventual changes contingent on significant shifts in the inflation outlook.
• Tebet also expressed confidence in the process of eliminating the primary budget deficit in 2024, emphasizing that, in addition to the measures already put forth to achieve this goal, Finance Minister Fernando Haddad has other revenues that were not yet factored into the calculations.
• "From next year onwards, the spending control treadmill will move at the same speed as the revenue increase treadmill" to help balance public accounts, Tebet said.
• Brazil’s budget deficit is anticipated to remain wide and only narrow slightly from 7.6% of GDP in 2023 to 6.6% of GDP in 2024. While the government will likely approve reforms to increase tax intakes by end-2023, Fitch believes that modest real GDP growth and structurally high spending will limit its fiscal consolidation

(Sources: Reuters & Fitch Solutions)