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Jamaica Monetary Policy Framework Published: 06 February 2020

  • Inflation in Jamaica will rise over the coming years as economic activity picks up and the cost of fuel imports rise with global crude prices.
  • Consumer price inflation will move higher this year into the central bank's 4.0-6.0% target band, settling near the upper threshold of this range at 6.0% over Fitch’s 10-year forecast period.
  • However, the expectation is that the Bank of Jamaica (BOJ) will keep its monetary policy accommodative in the near term, with interest rates to be lifted gradually with inflation.

(Source: Fitch)

Jamaica 10-Year Forecast Published: 06 February 2020

  • Jamaica will see stronger economic performance over the coming years following a reform program which will put the country on a more sustainable growth trajectory.
  • After poor economic governance led to two sovereign debt defaults since 2010, Jamaica is now closely coordinating policy with the IMF in a bid to improve its business environment, rein in government spending, diversify its economy, and reduce its external vulnerabilities.
  • As a result of recent and upcoming initiatives, Fitch is forecasting that real GDP growth will average 2.0% over the next decade, compared to an average of just 0.2% over the past ten years.
  • Following difficult reforms including streamlining the government and reducing public outlays, Jamaica's fiscal deficit has turned into a modest surplus, and this to continue over the coming decade.
  • Although Jamaica has lowered its corporate tax rate - part of its ongoing efforts to improve the business environment and incentivise investment - the government has worked to simplify its consumption tax framework and eliminate tax breaks for some industries, which will lead to increased revenues over the longer term.

(Source: Fitch)

Perception Of Impunity, Poor Living Standards Bolster Political Risks In Honduras Published: 06 February 2020

  • Honduran President Juan Orlando Hernández’s association with criminal activity will ensure that political tensions remain high over the coming quarters.
  • Although demonstrations have ebbed since violent nationwide protests broke out in April 2019, persistent poverty and high levels of violent crime underpin risks to social stability.
  • Fitch has revised down Honduras’ score in its Short-Term Political Risk Index to 41.7 out of 100.0, from 42.9 previously, as widespread dissatisfaction with the political elite increases the risk of significant policy change following the 2021 election.

(Source: Fitch)

China to halve retaliatory tariffs on hundreds of US goods worth about $75 billion Published: 06 February 2020

  • China on Thursday announced that it will halve tariffs on hundreds of U.S. goods worth about $75 billion.
  • Retaliatory tariffs on some U.S. goods will be cut from 10% to 5%, and from 5% to 2.5% on others, according to a statement from China’s Ministry of Finance. The adjustments will take effect from 1:01p.m on Feb. 14, Beijing time.
  • The cuts apply to about $75 billion worth of imports from the U.S. that was slapped with tariffs on Sept. 1, 2019, according to a separate statement on the ministry’s website.
  • After the cut, duties on U.S. crude will be reduced to 2.5%, from 5%, and the tariff on soybeans will be trimmed by 2.5%.

(Source: CNBC)

Oil rises for a second day as OPEC+ weighs coronavirus action Published: 06 February 2020

  • Oil futures rose for a second day on Thursday boosted by potential OPEC+ action to counter oil demand loss from the coronavirus outbreak and by optimism that trade tensions between the world’s two biggest economies were easing.
  • A technical committee advising the Organization of the Petroleum Exporting Countries and its allies led by Russia, known as OPEC+, may reach consensus on Thursday on the need to further cut oil output by at least 500,000 barrels per day (bpd), two sources told Reuters.
  • Brent futures rose by 17 cents to $55.45 a barrel, having risen 2.4% in the previous session. U.S. West Texas Intermediate futures gained 46 cents to $51.21 a barrel after rising 2.3% on Wednesday.

(Source: Reuters) 

Jamaica Teas’ net profit down in the first quarter Published: 05 February 2020

  • Jamaica Teas reported unaudited net profit of $27.70Mn (EPS: $0.04) for the first quarter December 2019, a fall-off of 44.4% (or $22.10Mn) from the $49.80Mn reported one year prior. 
  • The main contributor to the performance was increased expenses: sales and marketing cost increased by 30.6% (or $3.23Mn) while administrative expenses climbed 87.4% (or 36.22Mn).  This jump in administrative costs was attributable to increased staff costs and professional fees coupled with a foreign currency transaction loss at QWI of $21.0Mn.
  • The stock has declined 3.8% since the start of the calendar year. JAMT closed Tuesdays’ trading session at $6.03 and currently trades at a P/E of 11.9x earnings which is below the Junior Market Manufacturing Sector Average of 19.3x.

(Source: JAMT’s Financials)

BCB Decision to Give Clue on Sub-4% Rate Future Published: 05 February 2020

  • Market expectations for Brazil’s first monetary policy meeting of the year oscillated significantly over the six weeks since the Dec 11 gathering.
  • A slightly hawkish, though rather vague, central bank statement then had left markets torn between bets on a hold or a small cut in the policy rate.
  • Growth frustrations and rising concerns on the economic impact of the coronavirus outbreak have tipped our and the consensus expectation to a 25-basis-point cut to a record-low 4.25%.
  • monetary policy dashboard shows that, while there still is room for an accomodative policy, the space for additional cuts has narrowed in recent months.

(Source: Bloomberg)

AMLO Hates Calling It a ‘Tax Hike’ But Mexicans Are Paying More Published: 05 February 2020

  • Mexico’s president vowed not to raise taxes, but they’re creeping up anyway as the government struggles to boost revenue in a stagnant economy.
  • From Jan. 1, Mexicans started to pay increased levies on gasoline and sugary drinks. Taxes on cigarettes, in the meantime, went up 41%. And soon digital platforms such as Airbnb Inc. and Netflix Inc. will also start collecting value-added and income taxes from users.
  • Ask President Andres Manuel Lopez Obrador’s team and they will say these are mostly inflation-adjusted hikes, and that the government has kept its promise to steer clear of tax increases.
  • Mexico’s economic slowdown is throwing water on his campaign pledge that more-efficient state contracts and a crackdown on corruption would be just enough to cover for spending.

(Source: Bloomberg)

U.S. trade deficit shrinks in 2019 for first time in six years Published: 05 February 2020

  • The U.S. trade deficit fell for the first time in six years in 2019 as the White House’s trade war with China curbed the import bill, keeping the economy on a moderate growth path despite a slowdown in consumer spending and weak business investment.
  • The report from the Commerce Department on Wednesday also showed the Trump administration’s “America First” agenda decreased the flow of goods last year, with exports tumbling for the first time since 2016. President Donald Trump, who has dubbed himself “the tariff man,” has pledged to shrink the deficit by shutting out more unfairly traded imports and renegotiating free trade agreements.
  • Trump has argued that substantially cutting the trade deficit would boost annual economic growth to 3% on a sustainable basis. The economy has, however, failed to hit that mark, growing 2.3% in 2019, which was the slowest in three years, after expanding 2.9% in 2018.

(Source: Reuters)

Oil jumps 3% on reports of effective coronavirus drug Published: 05 February 2020

  • Oil prices jumped by more than 3% on Wednesday on media reports that scientists have developed a drug against the fast-spreading coronavirus that continued to weigh heavily on global economic activity.
  • News that the Organization of the Petroleum Exporting Countries and its producer allies are considering further output cuts to counter a potential squeeze on global oil demand further supported that had collapsed by more than 20% since early January.
  • Both Brent crude oil futures and U.S. West Texas Intermediate (WTI) crude jumped by more than 3% in morning trade. By 1220 GMT Brent was up $1.35, or 2.5%, at $55.31 a barrel and (WTI) was up $1.25, or 2.5%, at $50.86.

(Source: Reuters)