• The U.S. budget deficit will jump to $1.915 trillion for fiscal 2024, topping last year's $1.695 trillion gap as the largest outside the COVID-19 era, the Congressional Budget Office (CBO) said on Tuesday, citing increased spending for a 27% increase over its previous forecast.
• The CBO said in an update to its budget outlook that higher outlays for student loan relief, Medicaid healthcare for the poor, higher Federal Deposit Insurance Corp costs to resolve bank failures and U.S. aid to Ukraine and Israel make up the bulk of a $408 billion increase in this year's projected deficit since February, when it forecast a $1.507 trillion deficit.
• If realised, the forecast for the fiscal year ended Sept. 30 would mean a second consecutive substantial deficit increase for U.S. President Joe Biden, after deficits fell substantially in 2022 as COVID spending subsided. CBO forecasts that the deficit will climb further in fiscal 2025 to $1.938 trillion.
• For the fiscal 2025-2034 decade, the CBO raised its cumulative deficit forecast to $22.083 trillion, up $2.067 trillion from the February projection. It said debt held by the public at the end of 2034 would total $50.7 trillion, or 122% of gross domestic product, compared to the February forecast of 48.3 trillion, or 116% of GDP.
• Factors pushing up the long-term deficits included $1.6 trillion in increased outlays related to recent legislative changes, including extensions of the supplemental funding of $95 billion passed this year for Ukraine, Israel, and the Indo-Pacific region, CBO said.

(Source: Reuters)

• The Government is investing $6.31Bn on the rehabilitation of agricultural research facilities across the island over the next six years. The work will be done under phase two of the Rehabilitation of Research Centres Project, which was launched on June 13 at the Bodles Research Centre in St. Catherine.
• The objective of the Rehabilitation of Research Centres Project is to upgrade research, training, and administrative facilities for utilisation by scientists, extension officers, and agriculture training institutions.
• Phase one of the undertaking, which involved investment of approximately $1B3n, focused on the Bodles Research Centre. The project was initially slated for implementation between April 2018 to March 23 and was extended to March 2024.
• The Rehabilitation of Research Centres Project phase two will impact the five research stations under the Ministry’s Research and Development Division. In addition to Bodles, the others are Top Mountain Station in St. Andrew, Orange River Station in St. Mary, Hounslow Station in St. Elizabeth, and the Montpelier Station in St. James.
• Works to be undertaken at Bodles include construction and renovation of dairy parlor, warehouse and storage, immature paddock, cattle handling facility, scale house and clerk office, feed mixing facility, administration building and changing room and lounge.
• Minister of Agriculture, Fisheries and Mining, Hon. Floyd Green, said the significant investment is intended to revitalise research capacity to drive productivity and production.
• “In phase two, we won’t just focus on Bodles. We have to focus on the entire infrastructure of our research… The central objective of phase two is to ensure that all our research centres are seen as centres of excellence to ensure that they facilitate the Government’s drive to contribute to economic growth and development, import substitution and employment generation,” he said.

(Source: JIS)

• Trinidad and Tobago's (T&T’s) oil production saw a decline of 11% in the first quarter of 2024 compared to the same period in 2023, the latest statistics from the Ministry of Energy and Energy Industries show.
• For the first three months of 2024, the country's average production was 49,879 barrels of oil per day (bo/d) compared to 56,292 (bo/d) for the same three-month period in 2023, a decline of 6,413 bo/d or 11.3%, the Ministry's energy bulletin showed.
• Finance Minister Colm Imbert recently told the country in an affidavit that oil and gas production for the first six months of fiscal 2024 has been 15% and 5%, respectively, below the volumes originally expected for 2024.
• In addition, the prices of the commodities have also been lower than the Finance Minister had hoped, leading to a budgetary shortfall of more than $9Bn.
• Purchasing drugs and equipment for public hospitals, paying for tertiary education for students, to senior citizen grants, come from the money earned from the production and sale of oil, gas, and its derivatives.
• Given this, the continued decline in T&T’s oil industry calls for greater investments in T&T’s non-oil economic segments in order to diversify the sovereign’s economy. This, coupled with measures to improve the current state of the oil industry could allow the government to see greater revenues once realised.

(Sources: Trinidad Express Newspaper & NCBCM Research)

• Supporters for more consolidation in the euro zone's banking sector have been watching Spanish lender BBVA's hostile bid for Sabadell, alongside comments from some supervisors and lawmakers supporting the idea of more tie-ups. Regulators are keen for more consolidation - both within and across countries - because they believe fewer, stronger lenders will boost the economy and enable euro area banks to compete more effectively with larger, more profitable rivals in the United States and Asia.
• Yet, big banking takeovers have been rare since the 2008-09 global financial crisis, with most dealmaking forged out of necessity. The banking industry concentration, as measured by the share of bank assets accounted for by the largest five credit institutions, varies widely across the bloc.
• In Greece, Cyprus and the Baltic states, that share ranged between 88% and 95% in 2023, according to data from the European Central Bank analysed by Reuters. Several of these countries have also seen the biggest increase in concentration in the past decade, as financial crises forced lenders to acquire weaker rivals.
• In Spain, where the top five credit institutions' 69% share of bank assets is close to the euro zone average, the number of banks has fallen to 10 from 55 before the global financial crisis. Germany, by contrast, has hundreds of banks, according to data from its central bank.
• Euro zone banking concentration by country is, on average, higher than in the U.S., where the five biggest banks' assets share was 50% in 2021, data published by the Federal Reserve Bank of St Louis show. However, fragmentation is much higher in some euro zone countries, especially in bigger and richer economies like powerhouses France and Germany, where the top five institutions' asset share is 45% and 34%, respectively, the ECB data show. These countries have seen the least consolidation in the last decade, too.
• This is partly because they have avoided the crises that force regulators and lawmakers to dismantle the hurdles usually preventing domestic banking mergers. Impediments to cross-border deals are even greater and include differing regulations and labour laws and the lack of a euro zone-wide deposit insurance scheme and politics.

(Source: Reuters)

• China's May industrial output lagged expectations, and a slowdown in the property sector showed no signs of easing despite policy support, adding pressure on Beijing to shore up growth. Apart from retail sales that beat forecasts due to a holiday boost, the flurry of data on Monday was largely downbeat, underscoring a bumpy recovery for the world's second-largest economy.
• May industrial output grew 5.6% from a year earlier, National Bureau of Statistics (NBS) data showed, slowing from the 6.7% pace in April and below expectations for a 6.0% increase in a Reuters poll of analysts.
• Manufacturing investment in the first five months showed robust growth of 9.6%, underpinned by China's emphasis for "quality growth" through technological breakthroughs and innovation this year. On the other hand, economists have warned that rising trade tensions with the West over China's so-called over-capacity may impose more challenges to Chinese solar and electric vehicle producers.
• China's property market slump, high local government debt, and deflationary pressure remain heavy drags on economic activity. The latest figures point to an uneven growth that reinforces calls for more fiscal and monetary policy support.
• China's economy grew 5.3% in Q1, surpassing expectations, yet achieving the government's ambitious 5% annual growth target seems challenging due to a stagnant property sector.
• To address the downturn, China's central bank introduced a re-lending program for affordable housing, acknowledging that policy adjustments will take time to stabilize the market. Despite efforts to support homebuyers and stimulate demand, economic indicators like new bank lending and consumer confidence remain subdued, impacting broader economic recovery efforts.

(Source: Reuters)

• The government entered a US$20Mn loan agreement with the World Bank, for the Social Protection for Increased Resilience and Opportunities (SPIRO) Project. This initiative seeks to enhance social protection coverage in Jamaica by creating a national unemployment insurance program and fortifying the social protection delivery system.
• The government and the World Bank made a $20Mn deal for the SPIRO Project in Jamaica, aiming to improve social protection by setting up an unemployment insurance program and strengthening delivery systems.
• In his remarks during the SPIRO Visibility Ceremony, Minister of Finance, Dr. the Hon. Nigel Clarke emphasised that Jamaica must create an unemployment insurance plan. Dr Clarke cited the COVID-19 crisis and job losses as reasons. He noted that such a scheme would enhance social stability by offering support during economic downturns caused by unemployment.
• Lilia Burunciuc, the World Bank Country Director, stated that SPIRO will drive significant changes in Jamaica's social protection system, includes five parts and will run until January 2030.
• Component 1: Creating unemployment insurance in Jamaica, costing approximately US$1.34Mn, to build resilience. Component 2: Investing US$8.75Mn to improve employment services for employers, job seekers, including those on unemployment insurance, and vulnerable groups. Component 3: Allocating US$7.96Mn to develop and implement comprehensive information systems, offer technical support to modernise key programs, gather evidence for ongoing improvements, and provide capacity building to the Ministry of Labour and Social Security (MLSS) and other social protection stakeholders. Component 4: Covers project management at an estimated cost of US$1.9Mn, while component 5 will have a zero-fund allocation for rapid access to World Bank financing for response and immediate recovery needs during and immediately after a crisis.

(Source: JIS)

• Petrojam Limited, the government-owned oil refinery, plans to build an extra asphalt storage tank this year to increase its inventory capacity and meet the rising demand for its products.
• This move comes in light of anticipated increases in asphalt sales volumes from 154 kilo-barrels in the fiscal year 2023/24 to 234 kilo-barrels in 2024/25, supported by a planned capital expenditure of US$22.54Mn.
• The Jamaica Public Bodies Estimates of Revenue and Expenditure for the fiscal year ending March 2025 detail this and other scheduled activities by Petrojam. Additionally, the company's operational plan for 2024/25 includes 71 days allocated for essential capital maintenance and improvements to the plant.
• During this period, work will be undertaken to facilitate, among other things, catalyst regeneration, electrical infrastructure upgrading, replacement of pipelines, recycling of compressors as well as effecting of repairs to several tanks across the entity’s plant on Marcus Garvey Drive in Kingston.
• Amid the rising demand, Petrojam aims to increase its crude oil sales to 14.14Mn barrels in 2024/25, up from 12.68Mn barrels the previous year.
• Petrojam Limited, the island’s sole oil refinery, was incorporated in October 1982 as a wholly owned subsidiary of the Petroleum Corporation of Jamaica (PCJ). The facility processes crude oil, sourced primarily from Brazil, Ecuador and Colombia, into various finished products, including liquefied petroleum gas (LPG), auto diesel oil, turbo fuel, heavy fuel oil, asphalt, and unleaded gasoline.

(Source: JIS)

• Concerns were voiced that Bahamas Power & Light’s (BPL) new rate structure could undermine economic competitiveness and increase inflation by raising energy costs for many businesses.
• Jobeth Coleby-Davis, Minister of energy and transport, wrote to Tribune Business that BPL’s revised fuel charge arrangement, effective July 1, 2024, applies to “all classes” of customers, meaning residential as well as businesses of all sizes.
• The changes, described as the Equity Rate Adjustment, will give all consumers a 2.5 cent per kilowatt hour (kWh) discount on the first 800 kWh that they consume. But, above that threshold, BPL customers will have to pay a 1.5% charge for every kWh used over and above BPL’s actual cost of fuel.
• The Prime Minister’s Office, giving an example of how this would work, said: “If the [actual fuel charge] is 20 cents per unit (kWh), then the customer will be 17.5 cents per kWh for the first 800 units (kWh). The remaining units (kWh) will be billed at 21.5 cents.”
• However, multiple business community sources pointed out that enterprises of all sizes consume significantly more energy than 800 kWh per month, especially during the upcoming summer period.
• The Bahamian private sector is already faced with higher National Insurance Board (NIB) contribution rates and the insurable wage ceiling come July 1. The revised BPL rate structure is now another consideration entering their strategic planning mix.
• These increases could undermine the competitiveness of these businesses and erode earnings. It could also result in a higher passthrough of prices to customers, resulting in lower demand and higher inflation,.
(Sources: The Tribune & NCBCM Research)

• Antigua and Barbuda's tourism sector saw a record number of air arrivals in April 2024, up 7.8% relative to pre-pandemic levels. The Minister of Tourism reported to Cabinet that, 126,000 air arrivals from January to April 2024, surpassing the previous record of 118,000 arrivals during the same period in 2019.
• These impressive figures exclude arrivals from the 4th International Small Island Developing States (SIDS) Conference and the ICC T20 World Cup. This implies that the figure would likely be higher once reviewed.
• The United States remains the primary source market for visitors, followed by the UK, Canada, and the Caribbean.
• Antigua and Barbuda’s economy has sustained robust growth following the pandemic and is now expected to build on this in 2024. The dual-island is expected to grow by 4.75% this year, after growing by 3.86% in 2023. Notably, real economic activity is forecasted to return to pre-pandemic levels this year, driven by a rebound in tourism and construction activity - the two major contributors to GDP
(Sources: Loop Caribbean News & NCBCM Research)

• The U.S. Federal Reserve may have just ducked out of the presidential campaign spotlight with a fresh set of forecasts showing no interest rate cuts are likely until after Election Day.
• They issued projections showing greater hesitance than before about starting reductions in high borrowing costs that have made it more costly for Americans to buy anything on credit. This dynamic contributed to consumers' persistently poor view of the economy and Democratic President Joe Biden's management of it.
• As recently as March, Fed officials were forecasting interest rates would fall by 75 basis points this year, an outlook that would have meant cuts beginning this summer and continuing up to the Nov. 5 presidential election. That could have opened the Fed to criticism that it was tilting the scales late in the rematch between Biden and Republican former President Donald Trump.
• Now though, amid stickier-than-expected inflation and a still-strong job market, officials have scrapped that forecast for one with just a single quarter-point cut this year, suggesting no action is likely before their final meeting of the year in December. A delay until after the election could now be a headwind for Biden, who polls show receives low marks for his handling of the economy, despite near-record low unemployment, record-high household wealth and above-trend growth.
(Source: Reuters)