• Panama’s economy continues to grow, although slower than in previous years. At the end of the first half of 2024 (H1 2024), the country’s gross domestic product (GDP) grew by 2.2%, according to the latest data from the National Institute of Statistics and Census (INEC). For H1 2024, GDP totalled $38.7Bn, representing an $814.3Mn increase compared to H1 2023.
• Notably, during the second quarter of 2024 (Q2 2024), real GDP increased by 2.5%, reaching $18.25Bn. This growth represented a $444.0Mn increase in Q2 2023 and was attributed mainly to growth in Construction, Land Transport, Wholesale and Retail, Finance and Tourism.
• Investment in public infrastructure projects was one of the main growth drivers in the construction sector, while the increase in passengers on the Panama Metro by 7.9% and the increase in traffic on road corridors by 6.1% contributed significantly to Land Transport.
• The wholesale and retail sector saw a 6.4% rise, especially in food and automobile sales, according to official figures. Growth in Finance was led by a 7.0% increase in Loan balances, highlighting confidence in the financial system.  Meanwhile, increases in the Tourism sector were supported by 13.2% growth seen among hotels.
• That said, not all sectors experienced growth. There were declines in sectors such as Panama Canal toll revenues (11.7%), and in the activities of the Colon Free Trade Zone (12.5%). Mining and quarrying operations were also affected by the closure of a major copper mine.

(Source: Newsroom Panama)

• Brazil's central bank kicked off an interest rate-hiking cycle on Wednesday September 18, with a 25 basis-point (bps) increase, as expected and signalled more increases ahead to tackle a challenging inflation outlook amid stronger-than-expected economic activity.
• The bank's rate-setting committee, known as Copom, voted unanimously to raise the benchmark interest rate for the first time in over two years to 10.75%, in line with most forecasts.
• Policymakers said the balance of inflation risks is now tilted to the upside, flagging a stronger-than-expected labour market and robust growth. "The scenario, marked by resilient economic activity, labour market pressures, positive output gap, an increase in the inflation projections, and unanchored expectations, requires a more contractionary monetary policy," they wrote.
• Gustavo Sung, chief economist at Suno Research, said he expected two more rate hikes of the same size in November and December, bringing the benchmark rate to 11.25% at year-end. The central bank had held its policy rate steady at 10.50% in June and July after a series of cuts since last year to bring it down from a six-year high of 13.75%.
• Expectations for a rate hike, the bank's first since August 2022, firmed after second-quarter activity significantly exceeded forecasts, driven by a robust labour market and rising wages in Latin America's largest economy.
• However, bets on tighter policy had been building since late July, when central bank minutes indicated that policymakers would not hesitate to raise borrowing costs if needed amid growing upside risks for inflation.

(Source: Reuters)

• The Federal Reserve on Wednesday kicked off what is expected to be a series of interest rate cuts with an unusually large half-percentage-point reduction, a move aimed at boosting a cooling job market, while continuing to push down on inflation.
• "This decision reflects our growing confidence that with an appropriate recalibration of our policy stance, strength in the labour market can be maintained in a context of moderate growth and inflation moving sustainably down to 2%," Fed Chair Jerome Powell said in a press conference.
• Fed policymakers see the central bank's benchmark rate falling by another half of a percentage point by the end of this year, another full percentage point in 2025, and by a final half of a percentage point in 2026 to end in a 2.75%-3.00% range. The endpoint reflects a slight upgrade, from 2.8% to 2.9%, in the longer-run federal funds rate, considered a "neutral" stance that neither encourages nor discourages economic activity.
• U.S. stocks gained following the release of the statement and updated quarterly economic projections before reversing course to close lower on the day. The U.S. dollar was slightly stronger against a basket of currencies, while yields on U.S. Treasuries rose. Rate futures traders moved to price in even more easing than projected by the Fed, with the policy rate now expected to be in the 4.00%-4.25% range by the end of this year.
• The size of the cut announced on Wednesday will likely raise questions about the Fed's strategy, and whether policymakers were merely trying to account for the fast decline in inflation since last year, address concerns that the U.S. job market may be weakening faster than desired, or needed to ensure inflation fully returns to the target.
• Inflation, based on the Fed's preferred measure, is currently about half a percentage point above the 2% level, and the new economic projections now show the annual rate of increase in the personal consumption expenditures price index falling to 2.3% by the end of this year and down to 2.1% by the end of 2025. The unemployment rate is seen ending this year at 4.4%, higher than the current 4.2%, and remaining there through 2025. Economic growth is seen at 2.1% through 2024 and 2% next year, the same as in the last round of projections issued in June.

 (Source: Reuters)

• The interest rate for the most popular U.S. home loan fell last week to its lowest level in two years, on anticipation that the Federal Reserve would start cutting interest rates on Wednesday, potentially by as much as a half of a percentage point.
• The average contract rate on a 30-year fixed-rate mortgage dropped 14 basis points in the week ended September 30^th, to 6.15%, the Mortgage Bankers Association said on Wednesday. That was the lowest rate since September 2022, and followed a 14-basis-point drop the previous week.
• Applications for home loans, refinancing, and purchases all jumped last week, the MBA said, citing lower borrowing costs and improved housing affordability as home prices rose more slowly. US mortgage rates peaked about 11 months ago at nearly 8.0% and have since fallen as the Fed signalled its 2022-2023 rate-hike campaign had ended and that its next move would be a rate cut, once policymakers became confident inflation was under control.
• On Wednesday, September 18^th, the anticipation came to pass, and the US Fed announced a 50 basis point cut as it gained 'Greater Confidence' about Inflation. Still, one school of thought is that, given that the prospect of a rate cut has already helped send mortgage rates lower, mortgage rates might not actually drop much further right now as the rate cut was already priced in. However, mortgage rates are bound to fall a little more given that policymakers have made clear they intend to continue cutting interest rates into next year.

(Source: Reuters and NPR)

• Micro, small, and medium-sized enterprises (MSMEs) are being urged to embrace digital transformation to remain competitive in the global economy.
• Delivering the keynote address at the recently held Digital Jamaica Summit and Showcase, Minister of Industry, Investment and Commerce, Senator the Hon. Aubyn Hill, underscored the critical role of digital transformation in Jamaica’s future economic success.
• “In the rapidly evolving global environment, embracing digitisation, digitalisation, and digital transformation is necessary, as technological advancement holds the key to unlocking new levels of efficiency, productivity, and innovation”, Minister Hill said. He also noted that productivity is achieved when technology is utilised to streamline processes and eliminate inefficiencies, leading to greater output.
• Senator Hill emphasised that Jamaica must not limit its ambitions to local markets alone but should aim to increase per-capita income by seeking new markets globally.
• To help MSMEs access new markets, Jamaica is teaming up with the European Union (EU) through the Jamaica Business Development Corporation (JBDC) to expand equitable access to information and communications technology (ICT) nationwide as the country shifts towards a digital society. This effort is supported by a €9.5Mn initiative called ‘Digital Jamaica,’ funded by the EU. Minister Hill praised the GOJ/EU collaboration as a crucial and timely investment in Jamaica’s digital transformation.
• Emphasising the importance of the European Union’s investment in Jamaica’s MSME sector, he urged stakeholders to utilise this support effectively to ensure Jamaican goods and services meet international standards. One key area of focus is the proper packaging of export goods. Additionally, MSMEs were encouraged to integrate digital tools from the start, especially for managing human resources (HR) and accounting functions.
• The program is anticipated to greatly benefit crucial sectors such as ICT, education, and MSMEs. Senator Hill highlighted that 32.4% of Jamaican MSMEs are currently utilising digital technology, whereas 16.4% are still unaware of how digitalisation can enhance their operations.

(Source: JIS)

• The Government’s revenues for April to July 2024 (Q2 2024) outperformed the budget by 4.5%. Total revenues and grants amounted to $301.9Bn, ahead of budget projections by $12.9Bn with tax revenues totalling $270.8Bn, and non-tax revenue, $27.5Bn. This result represents a $21.3Bn increase year-over-year in total revenues compared to Q2 2023, reflecting ongoing improvements in domestic economic activities.
• Q2 2024 revenues also exceeded the budget by $3.7Bn, or 1.4%, for the review period. This was mainly due to total income and profits being $5.5Bn above expectations but was partially offset by lower-than-anticipated receipts from production, consumption, and international trade. Additionally, travel tax, which brought in $9.5Bn, fell $2.1Bn short of its target due to slower-than-expected visitor arrivals. 
• Non-tax revenue, which surpassed the budget by $7Bn was positively affected by the Government of Jamaica's drawdown on its insurance policies with the Caribbean Catastrophe Risk Insurance Facility (CCRIF).
• On the other hand, expenditures of $336.2Bn were marginally behind budget by $6.2Bn or 1.8%, but actually $37.1Bn higher than the total spending for Q2 2023.
• During the review period, central government operations led to a fiscal deficit of $34.3Bn, which was lower than the budgeted deficit of $53.4Bn but higher than the $18.4Bn deficit recorded for Q2 2023. The primary surplus totalled $21.7Bn, exceeding the budgeted surplus of $2.3Bn, though it was $12.9Bn less than the surplus reported for the same period in 2023.
• Given the anticipated sluggish growth in Q2 and the projected contraction for Q3 due to the effects of Hurricane Beryl, we expect a decrease in economic activity, leading to lower tax revenues. Additionally, with the expected rise in infrastructure expenditures for repairs on roads and schools, Q3 2024’s fiscal deficit will likely be wider than Q2 2024.

(Source: EPOC &NCBCM Research)

• The Barbados-based Caribbean Development Bank (CDB) is funding a feasibility study for the establishment of a Regional Credit Enhancement Facility (RCEF) for micro, small and medium-sized enterprises (MSMEs).
• It said the US$160,000 study would explore viable solutions to the recurring challenges MSMEs face in accessing financing and potentially pave the way for enhanced financial support structures in the future.
• CDB's acting project director L O'Reilly Lewis said that: 'Even with extensive investments in loans and equity, many Caribbean MSMEs continue to face substantial funding gaps because of underdeveloped financial systems. This study will help us better understand the market needs and design a facility that could effectively address these gaps if the demand is validated'.
• According to the CDB, once the demand is validated, the RCEF is expected to offer MSMEs guarantees and other financial products and support services that enhance their bankability.
• 'It is envisioned that the facility will also support financial institutions in expanding credit access, provide training to enhance the capabilities of financial institutions, guarantee schemes and MSMEs, and streamline processes for all involved. Additionally, the solutions will focus on the inclusion of traditionally underserved groups such as women, youth, and those in the creative industries,' the bank said.
• Recognising that MSMEs are pivotal to the region's economy, the CBD has revised its approach to focus on enhancing financial accessibility and supporting sustainable business practices.
• 'We are constantly looking for ways to support these enterprises, which are the backbone of many Caribbean economies. The results of the study will lead to practical solutions that can help our MSMEs overcome finance-related obstacles and drive their growth,' said Lisa Harding, the CDB's acting head of the Private Sector Division.

(Source: Trinidad Express Newspaper)

• Remittances to the Dominican Republic reached $7.10Bn during the first eight months of 2024 (8M 2024), marking a 5.1% increase compared to the same period last year, according to the Dominican Republic’s Central Bank. In August alone, US$952.3Mn was received, reflecting a 10.7% rise from August 2023.
• The Central Bank highlighted the significance of remittances, primarily from the U.S., in boosting consumption, investment and support for vulnerable sectors. U.S.-based Dominicans sent US$713.5Mn back to the country, representing 82% of total remittances.
• The Central Bank also noted that favourable U.S. economic conditions, such as a slight decrease in unemployment and an expanding services sector, contributed to the remittance growth.
• The Dominican Republic expects to receive over US$10.50Bn in remittances by the end of 2024, with foreign exchange earnings projected to surpass US$42.60Bn in 2024.
• Jamaica, on the other hand, noted a decline in its remittance flows for 7M 2024.  Total remittance flows of US$1.88Bn between January and July 2024, are 0.61% below the same period last year, likely attributable to the high base effects of the post-pandemic remittance surge to Jamaica.
• In Jamaica, remittances climbed to a historic high of US$3.5Bn in 2021, due to changing market conditions and restrictions under the pandemic that pushed more remitters to utilise the formal means of money transfers. Since then, the market has seen two years of shrinkage, to US$3.44Bn in 2022 and US$3.37Bn in 2023. Therefore, be noted that the marginal year-on-year decline is in line with a normalizing of flows that had increased significantly during the Covid-19 pandemic.

 (Sources: Dominican Today & NCBCM Research)

• U.S. retail sales unexpectedly rose in August as a decline in receipts at auto dealerships was more than offset by strength in online purchases. This suggests that the economy remained on solid footing through much of the third quarter.
• The report from the Commerce Department on Tuesday also showed retail sales were a bit stronger than initially thought in July. It combined with the decline in the unemployment rate last month to push against financial market expectations for a half-percentage-point interest rate cut from the Federal Reserve on Wednesday. U.S. central bank officials started a two-day policy meeting on Tuesday.
• The Atlanta Fed raised its third-quarter GDP growth estimate to a 3.0% annualised rate from a 2.5% pace after the data. This would be on par with the 3.0% economic growth in the second quarter. "There does not appear to be any reason for Fed officials to start out with a larger 50 basis points rate cut because whatever stress there is in the labour market, it isn't translating into weaker economic demand," said Christopher Rupkey, chief economist at FWDBONDS. "If this is an economy on the brink of recession, consumers certainly don't see it," he added.
• Retail sales increased 0.1% last month after an upwardly revised 1.1% surge in July, the Commerce Department's Census Bureau said. Economists polled by Reuters had forecast retail sales, which are mostly goods and are not adjusted for inflation, falling 0.2% after a previously reported 1.0% jump in July. Estimates ranged from a 0.6% decline to a 0.6% gain. Retail sales also increased 2.1% on a year-on-year basis in August. Online store sales rebounded 1.4% after falling 0.4% in July. Sales at gasoline stations dropped 1.2%, reflecting lower prices at the pump. Cheaper gasoline is likely freeing money for other spending.

(Source: Reuters)

• Canada's annual inflation rate reached the central bank's 2.0% target in August, data showed on Tuesday, fuelling hopes for a 50-basis-point interest rate cut by the country's central bank next month.
• The consumer price index posted its smallest rate of increase since February 2021 and the closely watched core price measures also cooled to their lowest levels in 40 months, Statistics Canada said. Consumer prices fell 0.2% on a month-on-month basis, it said.
• "We expect central bankers to slash their policy rate by 50 basis points next month in an effort to expedite the return to a more neutral setting," Royce Mendes, head of macro strategy at Desjardins Group, wrote in a report.
• The easing of price pressures was primarily helped by a drop in the prices of gasoline, telephone services and clothing and footwear, while shelter costs - mortgage and rents - continued to cool at a tepid pace as rents maintained their relentless rise.

(Source: Reuters)