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Express Catering Records Net Profit in Q1 Supported By Recovery in Tourism Sector Published: 28 September 2021

  • Buoyed by rising revenues, Express Catering Ltd reported a US$1.65Mn year over year increase in net profit to US$565.07K (EPS: US$0.0345), for the first quarter ending August 31, 2021. 
  • Revenues grew by 719.3% due to increased operations. The company is now back to 25 of the 27 operating locations following the suspension of all units in March 2020 due to the COVID-19 Pandemic. Since the onset of the pandemic there has been several instances of relaxation of the restrictive measures, which has assisted the recovery in the restaurant, tourism and hotel industry. However, the discovery of new strains and the reintroduction of restrictions, has dampened the near term outlook for the sector. 
  • The YoY performance was tempered by an increase in direct and administrative expenses as well as finance costs of 679.2%, 110.8% and 64.0%, respectively. 
  • Construction work on the revamped post-security food and beverage lounge at the Sangster Airport is projected to commence in September 2021. The first phase will see the relocation of existing brands to designated areas in the new food court. The benefit from this transformation is expected to begin in the winter season commencing December 2021. 
  • Express Catering’s stock price has increased 58.9% since the start of the year and closed Monday’s trading session at a price of $5.60 per share.

(Source: Express Catering Financials)

Tourism Minister Meets with Key Partners Abroad Published: 28 September 2021

  • Minister of Tourism, Edmund Bartlett, has noted that Jamaica remains a safe destination and wants to reassure Jamaica’s tourism interests of this. He highlighted that a key factor is its Tourism Resilience Corridors, which have a low infection rate of less than 1.0%. 
  • Jamaica’s tourism product remains strong and is indeed top of mind, despite the challenges. As a result, efforts will be made to therefore, continue to drive the marketing arrangements to minimize any possible fallout. 
  • Jamaica’s safety standards and protocols are highly celebrated worldwide and were key to it being able to welcome over 1.0Mn visitors since reopening its borders. Further, efforts have been ramped up to ensure that tourism workers are fully vaccinated, and much success has been achieved from this initiative. 
  • The Minister further noted that for one of America’s biggest airlines and a long-standing partner of Jamaica, Southwest Airlines, their flight operations into Montego Bay in coming weeks and months are expected to be very close to 2019 pre-pandemic record levels, signaling increased demand for destination Jamaica by US travellers. 
  • With an increase in visitor arrivals and revenue both critical to Jamaica’s post-COVID-19 economic recovery, Minister of Tourism, Hon. Edmund Bartlett, is currently overseas having key meetings with major investors and sector players. Meetings in Canada will focus on marketing and will include all key partners, such as Air Canada, WestJet, Sunwing, Transat and Swoop. They will also meet with tour operators, tourism investors, trade and mainstream media and key diaspora stakeholders.

(Source: JIS News)

Consumption Will Drive Dominican Republic's Economic Recovery To Pre-Pandemic Level By End-2021 Published: 28 September 2021

  • Fitch Solutions is more upbeat on the Dominican Republic’s economic recovery from the COVID-19 pandemic as a swift national vaccination campaign and resilient private consumption drive domestic activity. 
  • As such, the country’s 2021 growth forecast was revised upward to 8.2%, from 6.0% previously, implying that real GDP will fully regain 2019 levels by the end of the year. A 4.8% expansion is also forecasted for 2022. 
  • These upwards revisions imply that Dom Rep’s real GDP will surpass 2019 levels by end-2021 despite a 6.7% contraction in 2020. In the year through July 2021, seasonally adjusted monthly economic output expanded by an average of 14.9% y-o-y, led by a swift rebound in private consumption and exports as the economy reopened. 
  • However, the potential for additional economic shocks from COVID-19 or a faster than expected global monetary policy tightening cycle underpin downside risks to the sovereign’s growth in the short-to-medium term.

(Source: Fitch Solutions)

Political Uncertainty Threatens Brazil's Fiscal Consolidation Published: 28 September 2021

  • Brazil's fiscal deficits is expected to narrow over the coming quarters although a volatile political environment will undermine its consolidation efforts. 
  • Brazil's deficit is forecasted at 8.7% of GDP in 2021 and 6.4% in 2022, although Fitch Solutions acknowledges uncertainty over these forecasts. It is expected that robust revenue growth and declining expenditures will help narrow the deficit over the coming quarters. 
  • In the year through July, revenues rose 41.2% y-o-y and expenditures contracted 15.8%. Economic activity has rebounded at among the swiftest paces in the region, bolstering revenues. The recovery is expected to continue through 2022, albeit at a slower pace (forecasting real GDP growth of 1.9% in 2022). 
  • Nonetheless, political weakness is contributing to uncertainty over spending plans and the government's ability to meet mandated spending obligations.

(Source: Fitch Solutions)

UK Key Country View Published: 28 September 2021

  • Fitch Solutions, expects that UK’s real GDP to grow by 6.0% in 2021 and by 5.0% in 2022 as fiscal and monetary policy remain supportive. Though risks to their growth projections remain skewed to the downside. 
  • The UK's current account deficit is expected to widen to 3.8% in 2021 from 3.5% in 2020 as a recovery-induced increase in imports outpaces growth in exports. 
  • The current account deficit should begin narrowing from 2022, coming in at 3.4% of GDP in 2022 and 3.3% in 2023 according to forecasts, largely on account of stronger export growth as Brexit-induced disruptions to trade gradually dissipate. 
  • Fitch expects that the Bank of England (BoE) will maintain accommodative monetary policy over the remainder of 2021 and in 2022. However, high and rising inflation, alongside above-trend growth expected for this year and the next, have led Fitch to revise its interest rate outlook slightly: it now expects the BoE to increase its main policy rate by 15 basis points (bps) to 0.25% in H222.

(Source: Fitch Solutions)

Oil Up On Tight Supply, Brent Crude Nears $80 A Barrel Published: 28 September 2021

  • Oil prices gained on Monday for a fifth straight day, with Brent at its highest since October 2018 and heading for $80, as investors worried about tighter supplies because of rising demand in parts of the world. 
  • Brent Crude was up $1.44, or 1.8%, to settle at $79.53 a barrel, having posted three straight weeks of gains. US crude futures rose $1.47, or 2%, to settle at $75.45 a barrel, its highest since July, after rising for a fifth straight week. 
  • Goldman Sachs raised by $10 its year-end forecast for Brent crude to $90 per barrel. Global supplies have tightened due to the fast recovery of fuel demand from the outbreak of the Delta variant of the coronavirus and Hurricane Ida's hit to U.S. production.

(Source: Reuters)

Jamaica Will Return to A Fiscal Surplus On Rebounding Revenues Published: 24 September 2021

  • Jamaica’s fiscal balance will shift to a surplus of 1.4% of GDP in FY2021/22, from a deficit of 2.8% in FY2020/21, as the country’s economic rebound from the impact of the COVID-19 pandemic boosts revenues. The government ran budget surpluses from FY2017/18 to FY2019/20 as part of Jamaica’s consecutive IMF programmes from 2013 to 2019. However, the coronavirus pandemic caused a sharp contraction in economic activity and revenues in FY2020/21, flipping the balance into deficit. 
  • Expenditures are anticipated to grow 8.0% in FY2021/22 owing to capital and recurrent spending aimed at supporting the economy as it emerges from the pandemic. 
  • Total revenues are expected to rebound to 25.0% growth in FY2021/22, on the back of increased tax collections as the Jamaican economy recovers, after a fall off of 11.4% in FY2020/21 due to the impact of the pandemic on the local economy. Remittance inflows and the loosening of restrictions on activity, particularly in the tourism sector, have generated more revenues from income and sales taxes, leading to a 39.4% YoY rebound in revenues from April to July of 2021. 
  • Jamaica’s fiscal surplus is expected to grow to 1.9% of GDP in FY2022/23, as revenues continue to outpace expenditures. As the tourism sector continues its recovery, the government is expected to rein in spending, returning to the fiscal consolidation it pursued before the pandemic. The unemployment rate is anticipated to fall in the months ahead, from 9.6% in April 2021, reducing the need for social spending. This will shift the composition of spending towards capital programmes, which will accelerate the growth of the economy. 
  • However, another spike in cases and the re-imposition of no movement days could derail these projections.

(Source: Fitch Solutions)

Costa Rica: Public Employment bill returns to Legislative Assembly; IMF conducts first review Published: 24 September 2021

  • The full court ruling on the Public Employment bill returned to the Legislative Assembly this week, nearly two months since the Constitutional Chamber completed its review and found no procedural issues but identified 35 components of the bill to be unconstitutional. 
  • The Public Employment bill is a structural benchmark under the IMF program and one of the six bills comprising the IMF legislative agenda. It is the most advanced bill, having received approval in the first debate with 32 votes in favour back on June 18, 2021. 
  • From here, the Legislative Assembly appears to have three potential routes for the bill: 1) correct the components that were deemed unconstitutional and then vote on it again in the first and second rounds; 2) vote on the bill as is but would likely face future challenges; or 3) it could be outright rejected. 
  • Changes to the bill could result in the final approval requiring just a simple majority (32 votes) compared to the previously expected qualified majority (38 votes). 
  • Passing this bill would help to simplify public employment, reduce wage inequality, and help contain the increase in spending on salaries charged to the state budget. However, Costa Rica’s heightened social unrest owing to the IMF programme and proposed legislations, is still a significant blockade to the support and passage of the bill. 
  • The other IMF legislative agenda items are still scattered across various commissions. Most are expected to head to the Assembly floor shortly, with concern that they have not been fully socialized in the commissions prior to their deadlines.

(Source: Oppenheimer & NCBCM Research)

Mexican Peso Likely To Trade Sideways In Near Term Before Longer-Term Depreciation Published: 24 September 2021

  • Fitch Solutions holds a neutral view on the Mexican peso (MXN) over the near term, as its real interest rate differential with the US and Mexico’s political stability relative to its peers will be balanced by slowing economic growth and risks around financial market sentiment. 
  • Over the longer term, it is expected that the currency will modestly depreciate, weighed down by relatively weak economic fundamentals such as low investment. Risks are weighted to the downside. 
  • Fitch forecasts the unit will stand at MXN20.10/USD at the end of 2021, slightly weaker than its previous forecast of MXN19.80/USD to account for the unit’s recent performance. This will put more pressure on highly leveraged companies such as PEMEX, which have a majority of their debt denominated in USD.

(Source: Fitch Solutions & NCBCM Research)

BoE Sees Growing Case For Rate Rise As Inflation To Stay Higher For Longer Published: 24 September 2021

  • The Bank of England said the case for higher interest rates "appeared to have strengthened" on Thursday after it increased its forecast for inflation at the end of the year to over 4%, more than twice its target rate. 
  • The BoE said it expected the overshoot to be temporary, but two policymakers called for an immediate halt to the British central bank's 895 billion pound ($1.23 trillion) bond purchase programme, which is due to run until year-end. 
  • After the BoE statement, sterling interest rate futures priced in a 90% chance that the BoE would raise rates by February, up from just over 60% before, though some economists say this is premature given the challenges to growth. 
  • The Sterling rose by almost a cent against the U.S. dollar and two-year British government bond yields surged by their most since March 2020 as traders bet on an earlier rate rise by the BoE, which would be the first major central bank to hike since the COVID-19 pandemic.

(Source: Reuters)