CARIBBEAN ECONOMIES WILL EXPERIENCE SLOW ECONOMIC GROWTH in 2024 according to Angus Young, Chief Executive Officer (CEO) of NCB Capital Markets.
Mr. Young made his forecast while addressing the 19th annual conference of the Jamaican Stock Exchange (JSE) held recently at The Jamaica Pegasus Hotel in Kingston the capital city.
The Conference was held under the theme, ‘The Drivers of Capital: From Concept to Growth’.
In his address, Young told a packed audience, “Despite expectations from a slowdown from the global economy, territories within the region are expected to grow, albeit at a slower pace. This growth will push their economies above their 2019 pre pandemic levels,” the NCB senior executive said in his prediction.
He explained that the slow economic growth this year in the Caribbean will be “due to various factors such as struggling external demands, booming oil sectors, and historically low unemployment.”
In addition, the sloth in growth is also predicated on “easing inflation (which) should support private consumption. Yet there are uncertainties,” NCB’s Young explained.
By contrast, “Jamaica is still projected to grow boosted by strong external demands as well as higher expected government spending and easing of inflation growth in the economy should support crude corporate earnings albeit at a slower pace than in 2023,” Young said.
His predictions are further supported by data from the Jamaica Chamber of Commerce Business Confidence Survey results from 2023, “which shows that the majority of local firms indicated that suggesting that they anticipate favourable returns on their investments, some 53 percent believe that now is a good time to invest though business confidence is slightly down.”
According to him, economic apathy can also be blamed on heightened geopolitical tensions globally, and the effects of climate change dramatically evident by the severe drought affecting the Panama.
The canal, an artificial 82-Kilometer waterway, will be 120-year-old this May and remains one of the most important in the Western Hemisphere which carries some 5 percent of the world's maritime trade and 40 percent of U.S. container traffic.
Due to drought its water levels dipped below normal, forcing authorities to cut the number of daily ship-crossing from 38 to 24.
The decision has heightened delays and forced higher shipping costs. The severe drought occurs at a time too when commercial traffic through the Suez Canal has been significantly disrupted because of the widening Middle East conflict.
Nature, by drought and the humanitarian crises due to wars have suppressed global trade, and this has increased pressures and slowdown economic growth, Young said.
Nevertheless, in his estimation, Caribbean leaders are showing resilience and initiative to position regional economies so that they are able to withstand the pressures created by global crises.
“Regional leaders are challenging the status quo of global issues and elevating the region… to potentially address destabilizing threats within our shores,” the Trinbagonian told his listeners.
“…[T]he tides are turning as cooling inflationary pressure is now opening the door for potential rate cuts... widely anticipated for late 2024 ending a rate cycle characterised by eleven 11 heights (I’m not sure what this is kindly recheck your notes) from March 2022 and an eventual pause to observe past effects and monitor the data. This bodes well for local economy as rate cuts in the US give the banks in Jamaica room to cut rates, while maintaining a favourable interest rate differential,” he said.
Young said regional businesses have high hopes for interest rate cuts following dramatic post – COVID surges in the cost of borrowing. Dips in interest rates have laid the foundation for Central Banks including the Bank of Jamaica (BOJ) to follow suit and start lowering rates.
He justified his argument explaining that “in a high interest rate environment that we have today, we have a depressed valuation environment creating headwinds for the stock market. Furthermore, if investors can achieve high yields on money market instruments which typically have a short duration, the motivation to take elevated risks by buying equity diminishes.”
“Consequently,” Young counselled, “the stock market has had a downward trend. The depressed valuation market also leads to varix market for primary issuance on the capital market more on the debt and equity space. Issuant are hesitant during low multiples trying to raise equity immediately and trying to go public in the future when markets are more favourable.”
He spoke of possibilities for innovation, and with the millennials coming of age, “we are seeing a new wave of business-types across the Caribbean shifting from the traditional retail to great exposure to digital first businesses of all sectors.”
“We believe that as cooling inflation supports the prospects of a changed industry environment for the second half of 2024, and corporately for the local economy to grow, it should catalyse a reversal of interrogatory of stock prices and create a revival of private market activity.”
The Jamaica Stock Exchange will move out of varix territory and into bullish territory, and we at NCB Capital markets will be ready to play our role at positioning issuance and investors to benefit from this transition,” CEO Young emphasised.
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