Regional tourism heads share positive outlook ...but headwinds threaten growth prospects

The umbrella organisations for the Caribbean tourism sector are bullish on the outlook for the region's growth prospects in 2023, but headwinds on the horizon could upend those expectations.

 

The Caribbean Hotel and Tourism Association has indicated that based on Forward Keys data presented at the Caribbean Travel Forum last October, it anticipates "a successful rebound and projected growth for Caribbean tourism".

 

"We look to renewed hope for the Caribbean to move past recovery and into robust growth," CHTA President Nicola Madden-Greigg shared in an e-mail to Jamaica Observer.

 

"While this growth has not been linear and/or equal amongst all destinations it highlights the tremendous resilience and demand for the region…All indicators are that Caribbean tourism is back!" she added.

 

Referencing a World Travel and Tourism Council (WTTC) report, the CHTA president pointed out that the Caribbean tourism sector's performance contributed a 36.6 per cent growth in gross domestic product (GDP) for the region in 2021 over 2020. As such, the Caribbean has become the fastest region to experience rebound in tourism arrivals.

 

Although inbound tourist arrivals across the globe for September 2022 were 31 per cent lower than 2019, "the Caribbean by itself recorded" a three per cent increase in the third quarter of the calendar year.

 

"This clearly indicated a region that has moved past recovery into growth," Madden-Greig stated.

 

She continued: "It is important to recap the WTTC forecast of potential growth between 2022 and 2032: 'Travel and tourism's contribution to the global GDP is estimated to grow at an average annual rate of 5.8 per cent — outpacing the forecast average annual growth rate of 2.7 per cent for the global economy. The Caribbean Travel & Tourism sector will enjoy this growth and is expected to grow at an average annual rate of 5.5 per cent, more than double the region's overall economy growth of 2.4 per cent to reach US$85.1 billion in 2032 from US$50 billion in 2022. Meanwhile, Caribbean travel and tourism jobs are forecast to grow by an average rate of 3.3 per cent annually, creating more than 916,000 new jobs by 2032.'"

 

President and CEO of WTTC Julia Simpson, however, cautioned in the report, titled 'Travel and Tourism in the Caribbean: Prospects for Growth', that achieving of growth in GDP and jobs will depend heavily on the collaborative efforts of Government and the private sector along with community stakeholders to implement strategies and polices to address, among other things, intra-regional travel and aviation fees and port and transportation infrastructure.

 

"They also need to focus on enhancing sustainability, recruiting and retaining the workforce, diversifying product offers, and increasing preparedness for future crises. This will improve the attractiveness and competitiveness of the Caribbean as a destination in years to come," Simpson said in the report.

 

To this end, Madden-Greig underscored the need for the Caribbean tourism sector to "move forward" in a spirit of collaboration and partnership, pointing to this approach as the main reason for overcoming the economic ill-effects of the novel coronavirus pandemic.

 

"Now we must work collectively to ensure it not just survives but thrives. This means using the lessons learned over the past two-plus years, seeking innovative solutions through innovation and technology, and ongoing upskilling and reskilling of our workforce," the CHTA head emphasised.

 

For the current year, she revealed that the aim of the organisation is to focus on the micro, small, and medium tourism enterprises (MSMTE's), both through internal initiatives and collaborations with partners such as the OAS. With research, this will result in strengthening the implementation capacity and improving their resilience to not only recover but also grow.

 

According to the WTTC report, post-pandemic recovery could be strongest in St Vincent and the Grenadines and St Kitts and Nevis, with the organisation projecting growth of 145.3 per cent and 135.1 per cent, respectively.

 

Like the CHTA, the Caribbean Tourism Organization has forecast that the sector will "equal or exceed" its performance in 2019, noting that last year total arrivals reached between 85 per cent and 90 per cent of that amount.

 

"Nevertheless, a few destinations will require a longer period to reach pre-pandemic levels. We have seen unprecedented levels of airlift into the region from our source markets and the aforementioned recovery has been very evident in both land-based and cruise tourism. This speaks to the resilience of the sector and the positive perception of the region in our source markets, based on our hospitality, stability, connectivity, and our perennial well-earned status as a region for wellness," the CTO shared with its members last month.

 

Acting secretary general of the CTO Neil Walters further noted that while the organisation is still seeing some of the effects of the pandemic on global travel, "here in the Caribbean, we have noted a much more consistent pattern of travel which is a good indicator of a return to normalcy and a path to 2019 levels".

 

Similar to his colleague, he cites lessons to learn from challenges occasioned by COVID-19.

 

"Many of those challenges continue today, compounding the latent effects of the pandemic and evolving into new challenges for the tourism sector and Caribbean economies in general. Thus far, we have been able to ride out the supply chain issues, the political unrest existing in some regions of the world, and the economic unrest which seems to be forever looming in our key source markets," Walters stated.

 

Of note, the WTTC report also warns of downside risks to the growth prospects of the Caribbean tourism sector, despite positive projections.

 

"This includes the negative impacts of the Ukraine and Russia war, increasing inflationary pressures, in turn reducing disposable incomes in important source markets, and rising crude oil prices which can make travel costlier," it outlined.

 

Moreover, the report reiterated challenges which the Caribbean stakeholders should address — lack of air connectivity, prohibitive cost of air travel, lack of investment in infrastructure and human capital, and vulnerability to shocks and environmental crises, among others.

 

Walters concurred, highlighting that one of the CTO's concerns is the lack of intra-regional connectivity, especially in the Central, Southern, and Eastern Caribbean.

 

"The effect of this is particularly acute in these subregions, where several of our member countries depended on intra-regional travel in the pre-pandemic era as one of their key source markets," he elaborated.

 

Additionally, with plans to keep the Caribbean among the top-five earning Caribbean regions, he said the CTO will focus on three key pillars: people; diverse cultural and natural resources; sufficient and sustainable funding, including foreign direct investment; and market growth and product development.

 

"To date, the majority of our efforts have been focused on traditional markets, resulting in the significant recovery outlined above. But we do recognise that even within and abounding our traditional source markets there are untapped markets which are ripe for growth, including the non-traditional markets outside of the USA, UK, and Europe," Walters explained.

Article Published February 3, 2023 on jamaicaobserver.com

 

IMF director: T&T expected to continue growing very strongly

The lesson of the pandemic is that the Caribbean has to insulate itself from global shocks.

 

Speaking to journalists taking part in an International Monetary Fund workshop in Barbados, acting director of the Western Hemisphere department Nigel Chalk said the Caribbean has to build buffers.

 

These, he said, include managing low debt, having a flexible exchange rate and investing in international reserves.

 

Chalk said this makes it more possible for tourism-based countries like Jamaica to weather economic shortfalls in the United Kingdom which is predicted to have the slowest growth in Europe and therefore a populace that may be less inclined to travel to the Caribbean on holiday.

 

On Monday the IMF presented a more optimistic view in its World Economic Update than its October 2022 report, but it also cautioned more needed to be done to eliminate concern.

 

Closer to home the revised focus from the IMF global report came with a specific challenge for the Caribbean to create opportunities for economic growth.

 

In issuing the revised global outlook, The IMF’s Economic Counsellor and Director of its Research Department Pierre-Olivier Gourinchas said while the economy performed better than expected since their last update in October, it was not enough to eliminate concern.

 

“The global economy is expected to slow this year before rebounding next year,” he said.

 

Speaking from Singapore, the economist, said that this update being more positive than the last may be indicative of an economy in recovery including a decline in inflation.

 

Speaking more specifically on the outlook for the Caribbean, the IMF’s acting Director of the Western Hemisphere department, Nigel Chalk said the message from the report is that the region has to grow.

 

“We know that living standards in the region only go up when you have growth, when you have productivity,” Chalk said.

 

“The challenge facing the region is, individually the countries are relatively small, and there is less economies of scale,” he said.

 

He believes diversification could address two of the biggest threats facing the region.

 

He said there is a need for the region to insulate itself from negative global activity and provide growth opportunities.

 

“You have to balance the two things right,” he said. “You have to take advantage of your comparative advantage and you have to have a sufficiently diversified economy so that you are resilient to shocks.”

 

Specifically, however, in T&T with its energy-based economy the outlook is positive, even though inflation remains high and Chalk acknowledged the effects the Russia/Ukraine war has had in increasing energy prices.

 

“T&T and Guyana are growing very strongly and are expected to continue growing very strongly.” But “they are also suffering from relatively high inflation which will be something they’ll have to manage during the course of the year but in some sense, it is a little easier to manage that when there is a lot of income coming in from natural resource revenues.”

 

As for what to do with that energy sector revenue, he says the IMF has no standard advice when it comes to how these countries should use sovereign wealth funds such as T&T’s Heritage and Stabilisation Fund. The view is they provide an opportunity to put away excess profits from high oil prices that could be withdrawn when prices fall. This he said helps with “fiscal management with economic management.” Alternatively, it is a way for the country to replace “resources underground with essentially financial resources held in the international financial system.”

 

Ultimately it remains the country’s choice, because he said there may be a requirement locally to use the fund to address infrastructural or socio-economic shortfalls. However, if there is an excess of profits, then he said it would be prudent to put money away for future use.

 

All in the service of building economic resilience in the Caribbean, “the pandemic showed us that being dependent on one industry particularly tourism could leave you very exposed when you get hit by an external shock.” he said.

 

He also believes the road to diversification requires an enabling environment for growth.

 

Chalk said “I think encouraging environment for inward investment removing obstacles like bureaucracy, creating a good infrastructure in order to support private sector investment, having a strong education system in order to provide the human capital necessary for those investors to get workers,” is important.

 

He said while many in the region have solid education systems and finding solutions to the region’s brain drain is also a concern.

 

Chalk said regional governments ought to invest in creating an attractive environment so that people with specialist training and advanced degrees prefer to remain in the region rather than leave for a life overseas. Encouraging them to remain in the region could boost its growth potential.

Article Published February 3, 2023 on guardian.co.tt

 

 

US Futures Drop as Tech Earnings Curb Enthusiasm: Markets Wrap

 (Bloomberg) -- US equity futures dropped after disappointing earnings from Apple Inc., Amazon.com Inc. and Alphabet Inc. poured cold water on a rally fueled by investor optimism that rates are getting close to peaking.

 

Positive sentiment from this week’s surge in the Nasdaq 100 and S&P 500 evaporated as investors parsed late results from the tech trio that showed an economic slowdown is throttling demand for electronics, e-commerce, cloud computing and digital advertising. Their shares slumped in premarket trading. Ford Motor Co. also plunged after an earnings miss.

 

Treasury yields held Thursday’s drop and a gauge of the dollar was steady.

 

Investors have been cheering what they perceive as varying degrees of dovish tilts from central banks this week. Chair Jerome Powell said Wednesday the Federal Reserve had made progress in its inflation battle, but the big-tech earnings revealed cracks in the economy. Payrolls data due later Friday may show the US jobs market softening, complicating the Fed’s task.

 

“Risk markets are buoyed by lower implied policy rates and expectations that the Fed will achieve a soft landing,” Alex Rohner, a fixed-income strategist at Bank J Safra Sarasin Ltd. wrote in a note. “This will be very hard to achieve. In fact, substantial tightening cycles such as the current one have historically led to a sharp rise in unemployment, and a recession.”

 

The Stoxx Europe index retreated after closing within a whisker of a bull market on Thursday. French drugmaker Sanofi was the biggest decliner in index-points terms after forecasting a slowdown in profit growth this year. Carmakers also weighed on the index, following US peers lower after Ford’s disappointing earnings report.

 

Asian shares were mixed, with a regional index slipping with Chinese stocks while Japanese and Australian benchmarks eked out gains.

 

There was no respite in the rout of Gautam Adani’s companies. All 10 of the group’s stocks fell as the Indian billionaire battles to restore confidence in his conglomerate’s financial health after accusations of fraud by short-seller Hindenburg Research. Shares of Adani Enterprises Ltd. dropped 35%, the most ever during intraday trading, before paring loss.

 

Elsewhere in markets, oil headed for a second weekly drop as optimism over a recovery in Chinese demand dimmed and US stockpiles kept rising.

 

Gold rose slightly after slumping almost 2% on Thursday as traders sold off haven assets amid renewed optimism developed nations including the US are reining in inflation.

 

Key events this week:

• US unemployment, nonfarm payrolls, Friday

 

Some of the main moves in markets:

Stocks

• S&P 500 futures fell 0.7% as of 7:02 a.m. New York time
• Nasdaq 100 futures fell 1.2%
• Futures on the Dow Jones Industrial Average fell 0.2%
• The Stoxx Europe 600 was little changed
• The MSCI World index was little changed

 

Currencies

• The Bloomberg Dollar Spot Index was little changed
• The euro rose 0.2% to $1.0930
• The British pound rose 0.3% to $1.2263
• The Japanese yen rose 0.2% to 128.42 per dollar

 

Cryptocurrencies

• Bitcoin rose 0.4% to $23,551.07
• Ether rose 0.9% to $1,651.94

 

Bonds

• The yield on 10-year Treasuries was little changed at 3.38%
• Germany’s 10-year yield advanced six basis points to 2.14%
• Britain’s 10-year yield advanced one basis point to 3.02%

 

Commodities

• West Texas Intermediate crude was little changed
• Gold futures fell 0.2% to $1,927.70 an ounce

Article Published February 3, 2023 on Bloomberg.com

 

Bank of England rate hike says 'too soon to declare victory'

LONDON (AP) — The Bank of England announced another “forceful” increase in interest rates Thursday, saying it was too soon to declare victory against inflation that has slowed slightly but is still fueling a cost-of-living crisis, public-sector strikes and fears of recession.

 

The bank raised its key rate by half a percentage point, to 4%, resisting the temptation to follow the U.S. Federal Reserve in easing its response to the crisis. The British central bank has approved four straight increases of a half-point or more since Russia’s invasion of Ukraine triggered sharp rises in food and energy prices.

 

“We have done a lot on rates already … but it is too soon to declare victory just yet,” bank Gov. Andrew Bailey said at a news conference. “Inflationary pressures are still there … and we need to be absolutely sure that we really are turning the corner on inflation.”

 

Even so, the bank moderated expectations for further rate increases, dropping suggestions that it would respond “forcefully" to price pressures and implying that future moves would be smaller. Getting rid of that language was intentional and designed to send a signal to financial markets, Bailey said.

 

Central bankers worldwide are struggling to balance competing economic demands as they try to rein in inflation, which erodes savings and increases costs for consumers and businesses, without unnecessarily hurting economies that are still recovering from the effects of the COVID-19 pandemic.

 

The Federal Reserve has started tapering its response, boosting its key rate by just a quarter-point Wednesday. The European Central Bank, meanwhile, went big again Thursday, approving another half-point increase.

 

Economists had previously suggested that the Bank of England's decision Thursday would be the last big rate increase after inflation slowed to 10.5% in December from a 41-year high of 11.1% two months earlier.

 

The bank said the outlook for Britain’s economy is better than it was three months ago, with a steep decline in natural gas prices expected to reduce the squeeze on consumers and investment.

 

It expects inflation to fall sharply in the second half of this year and keep dropping to below the bank’s 2% target by June 2024.

 

As a result, the bank says Britain is likely face a less severe recession than previously forecast, with the overall size of the economy shrinking less than 1% over the next two years. A recession is often defined as at least two consecutive quarters of declining economic activity, though economists differ on how to measure it.

 

“This is nevertheless a much shallower decline than expected" in November, Bailey said. “The projected downturn in the economy, while still technically a recession by common definition, is now significantly milder than past recessions.”

 

The International Monetary Fund said this week that the U.K. was on track to be the only major economy to shrink this year, even as the outlook for the rest of the world improves.

 

Higher interest rates tend to crimp price rises because they increase the cost of mortgages, credit cards and other loans. But that also reduces demand for goods and services, slowing economic growth. The impact of rate hikes takes months to filter through into the wider economy, so policymakers have to make educated guesses about when to moderate their intervention.

 

Bailey warned that further rate increases would be needed if inflation turned out to be more persistent than expected, adding that there was plenty of uncertainty around the bank’s forecasts.

 

Of particular concern is the price of natural gas.

 

Wholesale gas prices in Britain soared to record highs last year as Russian President Vladimir Putin curtailed supplies to Europe to punish the West for supporting Ukraine. While prices have dropped 75% from their peak in late August, predicting energy prices is notoriously difficult, especially as the war persists.

 

The rise in energy bills has helped lead to the U.K.’s biggest drop in living standards since the 1950s. That has triggered a wave of strikes — including the biggest day of industrial action in more than a decade on Wednesday — as nurses, train drivers, border guards and teachers demand pay increases that keep pace with inflation.

 

The government has spent billions to help consumers and businesses hit by high energy costs this winter, which has squeezed public finances. Officials also are trying to prevent higher wages from causing a second round of domestically driven inflation that could be more difficult to tamp down.

 

The central bank also highlighted concerns about a shortage of workers, which is feeding through into rising wages, and the impact higher interest rates may have on economic activity.

 

“For now then, it looks like the Bank is erring on the side of caution when it comes to inflation, but that comes with the risk of pressuring businesses and consumers more than is necessary,’’ said Laith Khalaf, head of investment analysis at financial services company AJ Bell.

Article Published February 2, 2023 on newstimes.com