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Tourism Growth to Contain Jamaica's Current Account Deficit in 2022 Published: 14 January 2022

  • Fitch Solutions estimates that Jamaica’s current account deficit will narrow to 0.2% of GDP in 2022, from an estimated 0.7% in 2021, as a recovery in tourism will drive services export growth in the coming quarters.
  •  This is a revision from a surplus of 0.8% previously, as the ongoing spread of COVID-19 hampered the rebound of the tourism sector more than expected. Moving into 2022, it is expected that sustained services export growth and elevated remittances will narrow the current account deficit.  
  • The tourism industry is expected to make a stronger recovery in 2022 than in 2021, widening Jamaica’s services trade surplus to USD0.6Bn, from USD0.4Bn, equivalent to 4.2% of GDP. In 2021, the surges in COVID-19 cases globally delayed growth in the sector. It is expected that disruptions in tourism travel will decline in the coming quarters as the current Omicron surge wanes and vaccinations continue to proceed in Jamaica and source markets, accelerating the rebound of the sector.
  • It is forecasted that overnight stays will grow 48.7% in 2022, compared to 24.2% in 2021, though the industry will not fully recover to pre-pandemic levels until 2024. US airline operators like American Airlines and JetBlue are planning to increase their flights to Jamaica beginning in June 2022, driving inbound visitor arrivals in H222 in particular. This will support the growth in Jamaica’s services exports in 2022 and therefore the narrowing of the deficit.

(Source: Fitch Solutions)

Costa Rican Growth Momentum to Fade In 2022 As Consumption, Investment Slow Published: 14 January 2022

  • Costa Rican growth is expected to slow to 3.3% in 2022, from an estimated 5.9% in 2021, as favourable base effects fade and external demand softens. Costa Rica has rebounded from the COVID-19 pandemic at a faster pace than was initially anticipated, largely due to surging export growth and strengthening domestic activity. As such, Fitch has revised its 2021 growth estimate, from 3.9% previously, implying that the Costa Rican economy fully regained its pre-pandemic size by end-2021. 
  • From 2022 onwards, growth will decelerate, bringing it closer to the 3.2% average growth rate from 2015-2019. Costa Rican exports will likely expand at a less vigourous pace as global growth slows, while it is expected that tighter fiscal and monetary policy will temper consumption and investment in the short-to-medium term. 
  • Costa Rica’s comprehensive COVID-19 vaccine roll-out will help bolster business and consumer confidence over the coming quarters as the government phases out public health restrictions. As of January 10, 69.9% of the population was fully vaccinated, the highest rate in Central America. In turn, this will also push down unemployment. 
  • Nevertheless, households likely made large-scale purchases in 2021 as stores reopened. However, as base effects dissipate and the government implements fiscal consolidation measures in line with its 2021 IMF agreement, consumption will slow in the coming quarters.

 (Source: Fitch Solutions)

 

Dom Rep’s Remittances Jump to US$10.4B In 2021: Central Bank Published: 14 January 2022

  • The Central Bank of the Dominican Republic (BCRD) reported on Tuesday that in December 2021, remittances reached US$940.8 million, surpassing that recorded in December 2020 by US$68.5 million. Also, the 2021 remittance figures exceeded 2019 numbers by US$284.1 million, or 43.3 percent. 
  • Total inflows in 2021 reached US$10.4 billion, about US$2.2 billion more than the same period in 2020, registering 26.6 percent year-on-year growth, this being the highest level ever reached. 
  • “The continuous improvement in economic conditions in the United States is one of the main factors that continues to influence the behaviour of remittances, since 83.2% of December flows came from that country.”

(Source: Dominican Today)

Oil Edges Lower On Profit-Taking, Rate Hike Worries Published: 14 January 2022

  • Oil prices edged lower on Thursday as investors took profits after two days of gains amid fears of aggressive U.S. interest rate hikes, but the losses were cushioned by expectations of a strong economic recovery that will boost demand in a tightly supplied market. 
  • U.S. West Texas Intermediate (WTI) crude futures settled down $0.52, or 0.6%, at $82.12 a barrel, after rising 5.6% over the last two days. Brent crude futures fell $0.20, or 0.2%, to $84.47 a barrel. It had gained 4.7% over Tuesday and Wednesday. 
  • Some investors were taking a deeper look at data from the U.S. Energy Information Administration (EIA) on Wednesday. While crude oil inventories fell more than expected, the report also showed fuel demand has taken a hit from Omicron. Gasoline stockpiles increased by 8.0Mn barrels in the week to Jan. 7, compared with analyst expectations for a 2.4Mn-barrel rise. 
  • In reality, the weekly EIA report was less bullish than the headline number, as total crude oil inventories fell 4.8Mn million barrels but were more than offset by a stock build across refined products. The drop in crude inventories might have been related to end-of-year tax issues on oil stocks onshore in Texas and Louisiana. However, losses were limited by speculation that Omicron was not severe enough to derail a global demand recovery and cold weather in North America. 
  • Oil prices soared more than 50% in 2021, and some analysts expect the rally to continue, forecasting that scant production capacity and limited investment could lift crude to $90 or even above $100 a barrel. JP Morgan forecast oil prices to rise as high as $125 a barrel this year. U.S. crude futures for delivery in February 2023 traded at a discount of more than $9 to crude futures for delivery in February, moving into overbought territory for the first time since November.

(Source: Reuters)

Delta Keeps 2022 Profit Forecast On Travel Rebound Despite Omicron Published: 14 January 2022

  • Delta Airlines said Thursday that the surge of the Omicron variant of COVID-19 will drive it to a first-quarter loss, but that it still expects to turn a profit this year on stronger travel demand. CEO Ed Bastian said Omicron is expected to delay the rebound in travel demand by 60 days, forecasting losses for January and February and then profits in March. 
  • Airlines, including Delta, together canceled more than 20,000 U.S. flights from Christmas Eve through the first week of the year as a spike in COVID infections among crews left them short-staffed and winter storms rolled through some of the country’s busiest airports. 
  • Some 8,000 Delta’s employees, roughly 1 in 10, have tested positive for COVID over the last four weeks. For United Airlines, it was noted on Monday that some 3,000 of its roughly 67,000 U.S. employees had COVID simultaneously and that on one day at its Newark, New Jersey, hub, a third of the staff called out sick with the virus. 
  • Delta said in an earnings release that its operation has stabilized and that Omicron caused it to cancel only 1% of its flights over the past week. Further, the CEO noted that while the new variant is not done, it appears that the worst may be behind them. 
  • With that said, Delta flights to Jamaica are not expected to suffer any major disruptions in the near term which bodes well for tourism.  

(Source: CNBC News)

Finance Minister Tables Second Supplementary Estimates Published: 13 January 2022

  • The Government will be increasing recurrent expenditure by approximately $25.8 billion for FY 2021-22. This has increased the overall expenditure to $893 billion. However, capital remains at the level of the first supplementary estimates, with some reallocation between projects. 
  • Clarke said at the point of the First Supplementary Estimates, there were no final settlements with any of the public-sector bargaining groups. Consequently, the Government’s offer for increases in wages and salaries was captured under the Contingencies activity of the Ministry of Finance and the Public Service. Since then, 31 bargaining groups have settled, which is now the primary reason for the Second Supplementary Estimates this fiscal year. 
  • An additional $5 billion to the COVID Allocation of Resources for Employees (CARE) Programme, given the continuing impact of the COVID-19 pandemic, and the costs associated with a Special Employment Programme in December 2021, to assist some of those most vulnerable to the economic impact of the pandemic, were also captured in the Second Supplementary Estimates. 
  • Debt-related costs also contributed to the second supplementary estimate. The premium for catastrophe bonds issued earlier in the year was not fully captured on the budget and this is being addressed under the Second Supplementary Estimates. Assistance has also been extended to the National Water Commission and the Central Wastewater Treatment Company to facilitate the repayment of maturing guaranteed debt.
  • Furthermore, domestic interest rates have increased, and the currency has depreciated, resulting in increases in the debt service requirements. Other expenses such as additional requirements for the Ministry of National Security, and support to the National Solid Waste Management Authority, are being addressed through the supplementary figures.  

(Source: JIS)

World Bank predicts massive economic growth for Guyana Published: 13 January 2022

  • At a time when the global economy is plagued with a myriad of uncertainties, Guyana remains one of the fastest-growing nations in the world, with an economy that is projected to expand by a massive 49.7 percent this year, according to the latest edition of the World Bank’s “Global Economic Prospects”. 
  • The report, issued on Tuesday, indicates a significant improvement from the one released in June 2021, which estimated Guyana’s growth at 23.7 percent. This means that within the last few months, Guyana’s economic potential has doubled, as measured by the country’s Gross Domestic Product (GDP). 
  • Based on the World Bank report, Guyana is the only country in Latin America and the Caribbean that is expected to record double-digit growth this year. Coming a close second is St. Lucia, which is expected to record economic growth of 9.6 percent. 
  • The January 2022 report now estimates a 2023 growth of some 25 percent for Guyana, as opposed to the previously predicted 23 percent. It is possible that this figure could be revised upwards in the coming months as Exxon Mobil made two additional oil discoveries off the coast of Guyana in January 2022. 
  • Meanwhile, economic growth in the wider Caribbean is estimated to reach 7.3 percent this year, and 5.9 percent in 2023. However, this doesn’t necessarily spell good news for the region, since, according to the report, those improvements reflect a large contribution from Guyana. This is due largely to the fact that the majority of Caribbean countries are reliant on their respective tourism industries, which have taken significant hits due to the continuous spread of the novel coronavirus (COVID-19) and the global pandemic it has triggered.

 (Source: Guyana Chronicle)

 

 

Inflation rises 7% over the past year, the highest since 1982 Published: 13 January 2022

  • The consumer price index, a metric that measures costs across dozens of items, increased 7% in 2021, according to the department’s Bureau of Labor Statistics. On a monthly basis, CPI rose 0.5%. Economists surveyed by Dow Jones had been expecting the gauge to increase 7% on an annual basis and 0.4% from November. The annual move was the fastest increase since June 1982 and comes amid a shortage of goods and workers and on the heels of unprecedented cash flowing through the U.S. economy from Congress and the Federal Reserve. 
  • Excluding food and energy prices, core CPI increased 5.5% year over year and 0.6% from the previous month. That compared with estimates of 5.4% and 0.5% respectively. The growth in core inflation was the largest annual growth since February 1991. 
  • Shelter costs, which make up nearly one-third of the total rose 0.4% for the month and 4.1% for the year. That was the fastest pace since February 2007. Used vehicle prices, which have been a major component of the inflation increase during the COVID pandemic due to supply chain constraints that have limited new vehicle production, rose another 3.5% in December, bringing the increase from a year ago to 37.3%. 
  • Conversely, energy prices mostly declined for the month, falling 0.4% as fuel oil was down 2.4% and gasoline fell 0.5%. Still, the complex as a whole rose 29.3% in the 12 months, including a gain of 49.6% for gasoline. 
  • Fed officials are watching the inflation data closely and are widely expected to raise interest rates this year to combat increasing prices and as the jobs picture approaches full employment. Though the central bank uses the personal consumption expenditures price index as its primary inflation measure, policymakers take in a wide range of information in making decisions.

(Source: CNBC News)

Natural gas surges 14% as cold snap ahead is expected to boost demand Published: 13 January 2022

  • U.S. natural gas futures surged more than 14.0% on Wednesday as temperatures drop and forecasts tell of more winter weather ahead. The contract for February delivery advanced 14.3% to settle at $4.857 per million British thermal units, hitting the highest level since November. 
  • The heating demand outlook for the eastern third of the U.S. has strengthened materially for this weekend and for the last week of January, noting that this Saturday could see record natural gas demand due to a cold blast forecast for Friday. The weather has gone from being a non-factor or bearish factor all season to being meaningful, again, for prices and demand. 
  • After surging for much of 2021, natural gas prices dropped 36% during the fourth quarter following warm temperatures and as the omicron variant sent jitters through the market. Still, the contract posted a 47% gain for 2021 and is already up nearly 30% for 2022.

(Source: CNBC News)

Jamaica Could Reach Fourth Wave Peak Week By End Of January/Early February – CMO Published: 12 January 2022

  • Chief Medical Officer (CMO), Dr. Jacquiline Bisasor-McKenzie, said that Jamaica could reach the peak week of the fourth wave of the coronavirus (COVID-19) by the end of January/early February. She said the projections from the Ministry of Health and Wellness are that the country could see as many as 11,500 confirmed cases of COVID-19 during that peak week. 
  • “We are seeing right across the world that the Omicron variant is proving to be a more transmissible virus and so the numbers are rapidly increasing in several countries, and we have started to see that here. Based on the projections, using the reproductive number, it could mean that we may take another three weeks or so to get to the peak of this fourth wave based on the present numbers,” she said. 
  • As the pandemic drags on for a third calendar year, governments globally are becoming reluctant to pursue lockdown measures given the disruptions to economic activity and the financial impact on businesses and households. This week Spain became the first European country to propose re-evaluating the pandemic using different parameters and is considering to treat the virus similar to the flu as part of efforts to keep its economy open. This is against the background that deaths as a proportion of recorded cases have fallen dramatically.
  • Despite the rapid rise in cases, we do not anticipate that this will curtail economic activity to the same extent as it did in 2021, particularly given the stance of the government on discontinuing the use of lockdowns as a means to control the pandemic. This should result in fewer disruptions to commercial activity. This, coupled with the lessons learned over the past two years and increased vaccinations should help to mitigate the adverse effects of the 4th wave on business and economic activity in 2022.

(Sources: JIS and NCBCM Research)