• Fitch Solutions has lowered its 2023 and 2024 forecasts from 1.7% and 2.0% to 1.5% and 1.8%, respectively, for Colombia as policy tightening will continue to weaken consumption and investment growth.
• This downward revision comes on the back of a previous revision from 2.0% to 1.7%, after the preliminary Q223 real GDP print showed that the economy contracted 1.0% q-o-q in seasonally-adjusted (SA) terms.
• Fitch’s most recent adjustment reflects its updated monetary policy forecast, with persistently elevated inflation likely to push back the timing of the first rate cut by the Banco Central de la República (BanRep) from September to October, with the possibility of even further delays to December.
• With inflation remaining sticky through 2024, Fitch expects BanRep (Colombian Central Bank) will keep rates higher for longer, which will keep borrowing costs elevated and depress investment and private consumption growth.
• That being said, uncertainty regarding interest rates does pose some downside risk to Fitch’s growth forecasts. While Fitch expects that rate cuts will likely begin in October, inflation remains hot. If headline or core inflation remains stickier than expected, BanRep would likely delay the cuts to December 2023 or possibly 2024. This would keep borrowing costs high and would lead to a more pronounced slowdown in 2023 and likely the early months of 2024.

(Source: Fitch Solutions)

• The U.S. economy posted its first period of positive growth for 2022 in the third quarter, at least temporarily easing recession fears, the Bureau of Economic Analysis reported Thursday, Oct. 27.
• GDP, a sum of all the goods and services produced from July through September, increased at a 2.6% annualized pace for the period, according to the advance estimate. That was above the Dow Jones forecast of 2.3%.
• That reading follows consecutive negative quarters to start the year, meeting a commonly accepted definition of recession, though the National Bureau of Economic Research is generally considered the arbiter of downturns and expansions.
• The growth came in large part due to a narrowing trade deficit, which economists expected and consider to be a one-off occurrence that won’t be repeated in future quarters.
• GDP gains also came from increases in consumer spending, nonresidential fixed investment, and government spending. The report reflected an ongoing shift to services spending over goods, with spending on the former increasing by 2.8% while goods spending dropped by 1.2%.

(Source: CNBC)

• Brazil’s current account deficit will narrow from 2.3% of GDP in 2022 to 2.1% of GDP in 2023, as import growth cools more rapidly than exports. Fitch’s forecast for 2022 is a revision from 1.9% previously, as the goods trade surplus has been narrower than anticipated.
• Notably, in the year through September, Brazil ran a current account deficit of USD29.6Bn, notably wider than at the same point in 2021, and is on track to post the widest deficit since before the pandemic.
• The widening of the overall deficit was driven by a larger services trade deficit, as Brazilians resumed outbound travel as the pandemic faded; and an expansion of the primary income deficit, as foreign companies have increased repatriations due to high commodity prices and stronger growth in Brazil.
• In 2023, goods export and import growth will both slow, as the world economy weakens. Consequently, Fitch forecast 5.1% growth in exports, and 3.2% in imports in 2023, widening the goods trade surplus from 2.1% of GDP in 2022 to 2.4%.
• On the export front, it is expected that prices for Brazil’s primary commodity exports – including iron ore, soybeans, coffee and crude oil – will ease, with none likely to return to the highs seen in H1 2022. While on the import front, moderating commodity prices will cut the cost of Brazil’s import bill.

(Source: Fitch Solutions)

• The House of Representatives on Tuesday (June 21) approved the General Consumption Tax (Amendment of Schedule) Order, 2022, Resolution, which will facilitate the exemption of lithium-ion batteries from General Consumption Tax (GCT). 
• Minister of Finance and the Public Service, Dr. the Hon. Nigel Clarke mentioned that as the Government seeks to achieve accelerated and aggressive increases in renewable energy penetration, lithium-ion batteries will play a pivotal role in that energy transition, adding that they are also aligned with the policy to promote electric vehicles. 
• Clarke explained that the Ministry of Science, Energy and Technology over the years has been in constant dialogue with his Ministry about the category of items that constitute and represent appropriate technology, for which the Government’s long-standing policy of promoting renewables would mean that they would be subject to a differential tax regime. He said lithium-ion batteries were not among that list of about 14 items, “but technology has changed, and lithium-ion batteries are no longer only used in portable electronics, but now are increasingly being used in renewable technologies”. 
• This action by the Ministry of Finance is influenced by the positive impact that the use of energy-efficient technologies has on reducing costs associated with electricity generation, especially in a time when energy prices are rising due to geopolitical tensions. 
• If assessed against 2019 data, the government will likely lose $193Mn in revenues from this GCT exemption on lithium-ion batteries. However, the move will help the government to achieve its renewable energy target of 33% by 2030 and 50% by 2037 and yield costs savings from reduced non-renewable energy bills over the long-term. 
• Companies such as Tropical Battery which are diversifying operations to take advantage of the shift in the energy policy to cleaner, renewable energy will also benefit. Tropical Battery has added a new subsidiary Tropical Mobility, an electric mobility solutions company, to serve the needs of the emerging electric vehicle (EV) market. It has also expanded its recycling partnership to include lithium-ion batteries which will support revenue generation as the GCT exemption incites greater demand for technologies such as cars which use lithium-ion batteries.

(Sources: JIS News & NCBCM Research)

• A half-point interest rate increase "will be on the table" when the Federal Reserve meets on May 3-4 to approve the next in what are expected to be a series of rate increases this year, Fed Chair Jerome Powell said Thursday in comments that pointed to an aggressive set of Fed actions ahead. 
• In likely his last public remarks before the Fed's next session, Powell also said he felt investors currently anticipating a series of half-point hikes were "reacting appropriately, generally," to the Fed's emerging fight against rising prices. 
• His comments appeared to pin down an expected rate path much steeper than projected at the Fed's March meeting, when policymakers at the median anticipated the target overnight federal funds rate would be increased to 1.9% by year's end. 
• The potential speed of the Fed's action has led some economists to warn a recession may now be more likely if businesses and households cut back spending more than anticipated as borrowing costs rise, or stock and other asset prices drop in value and eat into household wealth. 
• The interest rate on the 2-year Treasury note, the maturity most sensitive to expectations about Fed policy, rose above 2.7% for the first time since December 2018. Rising yields on both short- and long-term bonds are increasing costs for a variety of loans -- most notably the 30-year mortgage commonly used to finance home purchases, where the average rate rose to over 5% this week -- a key channel through which the Fed influences the economy.

(Source: Reuters)

• President Irfaan Ali noted that Guyana now has the resources to build a diversified economy from its energy, oil and gas sectors. The oil and gas industry has put Guyana in a unique position to transform its economy, benefit citizens, and make a valuable contribution to the rest of the world. 
• One of the key areas in which the proceeds from oil and gas can contribute to bolster the diversification of other industries, is through investment in energy-generating initiatives. These can be used to drastically reduce the cost of energy in Guyana and the wider region. The agriculture, manufacturing and tourism sectors would stand to gain from reduced cost of energy. 
• Guyana is strategically positioned to create regional energy security, with a number of energy projects in the works, including an energy corridor with Brazil and Suriname. However, the president noted that the country will remain uncompetitive and the private sector will not grow if the cost of energy is not addressed.

(Source: Guyana Chronicle)

• CPJ reported a net profit of US$5.42Mn (EPS: US$0.48) for its 6 months ending December 31, 2021, up from a net loss of US$2.79Mn in the prior period.  This performance was supported by a 138.1% increase in revenues, ending the period at US$58.08Mn. 
• There was a surge in business activity during the period after the easing of COVID-19 restrictions resulted in greater tourist numbers, which boosted sales along with traditional Christmas activity. The company experienced a rebound in both its hospitality and retail channels, which had felt the full brunt of the pandemic. Overall most of its financial metrics saw a significant increase owing to higher business activity. 
• Going forward the company should continue to see a rebound in earnings on the back of recovery in the hospitality industry, although new variants of COVID-19 pose a downside risk, which could temper the pace of the recovery. 
• CPJ’s stock price has increased by 55.81% since the start of the calendar year. The stock closed Thursday’s trading session at $20.31 and currently trades at a P/E of 39.8x earnings which is above the Main Market Distribution & Manufacturing average of 25.9x. The significantly higher P/E for CPJ relative to its peers suggests that the market is already pricing in the recovery in its operations.

(Source: Company Financials)

• Renewed tourism activity in Jamaica will drive real GDP growth of 4.6% in 2021 and 4.1% in 2022, up from a 9.9% contraction in 2020 according to Fitch Solutions. This is an upward revision from its previous 2021 forecast of 4.4%. It follows the Q2 2021 data which showed quarterly growth of 14.2% y-o-y (seasonally adjusted 2.4% q-o-q).
• The modest easing of travel restrictions and more limited overnight curfew in Q2 2021 supported tourism arrivals and commercial activity. Tourism historically accounts for roughly one-third of economic activity. Foreign arrivals increased 5,065.1% y-o-y in Q2 2021, a figure that is inflated by the near-complete shutdown of the tourism industry in Q2 2020 amid the onset of the COVID-19 pandemic. Q2 2021 arrivals were 61.2% below Q2 2019, suggesting that the Jamaican economy remains well below its pre-pandemic level. Fitch forecasts Jamaican real GDP will not return to pre-pandemic levels until 2023.
• Real export is expected to grow 8.2% in 2021 and 3.8% in 2022 as high levels of COVID-19 vaccinations in key source markets will support tourism inflows to Jamaica and services exports. The US, UK and Canada, key tourism source markets, ramped up their vaccination campaigns in H1 2021, with at least 65.0% of their respective populations receiving at least one dose of a coronavirus vaccine as of October 2021. This is expected to underpin greater demand for overseas travel.
• Moreover, airline and cruise ship companies have announced plans to increase travel options to Jamaica. American Airlines announced that it would resume direct flights to Jamaica in December 2021, with 17 nonstop flights per day. Meanwhile, Carnival announced that 110 cruises will stop in Jamaica from October 2021 to April 2022, while Royal Caribbean announced that it would resume cruises to the country beginning in November 2021.

(Source: Fitch Solutions)

• United States (US)-based Frontier Airlines has announced plans to increase the number of weekly flights to Jamaica, beginning November 1. International Sales Manager, Alfredo Gonsalez, has said that three new gateways will be added to the existing slate, to bring the number of destinations from which scheduled service into Montego Bay is provided, to four. 
• Frontier will commence flights from Atlanta, Georgia on November 1, Orlando, Florida on November 2, and Newark, New Jersey on December 17. These, he indicated, will be in addition to flights from Miami, Florida to Montego Bay, which commenced in May. 
• The decision was based on the need identified after two very difficult years in the travel industry, consequent on the coronavirus (COVID-19) pandemic, to connect [and] bring people from the US back to Jamaica [and] people from Jamaica to the US. He said the airlines’ leadership decided early in the pandemic to identify key potential destinations that would need to be connected, once countries globally lifted or relaxed travel restrictions, adding that Jamaica was definitely one of them. 
• This augurs well for recovery in the tourism industry and indicates that there is demand for travel to Jamaica. It comes against the background of increased consumer confidence around travelling for vacation purposes. According to the US Conference survey of consumer confidence in October, 50% of Americans indicated that they plan to go on vacation within the next six months, the largest since February 2020. As the US market accounts for the largest share of visitors to Jamaica, this bodes well for the demand for our tourism product. 
• Notwithstanding, the CDC’s risk assessment for COVID-19 for Jamaica could pose as a deterrent to some travelers as Jamaica is categorised at level 4. This means that persons should avoid travelling to the destination or be fully vaccinated before travel. The hope is that a continued downtrend in COVID-19 cases will result in a reduction in the island’s risk category ahead of the peak winter season.

(Source: JIS News & NCBCM Research)

• Jamaica Producers Group ('JP') announced that it has established Grupo Frontera Limited ('GFL' or 'Grupo Frontera'), a 50/50 holding company with Norbrook Equity Partners (‘Norbrook’). As part of the transaction, Grupo Frontera recently acquired the assets and operations of Grupo Alaska ('Alaska'), a leading ice and water company in the Dominican Republic. Grupo Frontera was established by JP and Norbrook to acquire and grow well-positioned companies in the Spanish speaking Caribbean and Central America, the first of which is Grupo Alaska. 
• JP is a Jamaican-owned multinational with its primary businesses in food and drink and logistics and infrastructure. JP owns and operates Hoogesteger Fresh Specialist BV, the market leading fresh juice manufacturer supplying Holland, Scandanavia and other markets in Northern Europe. It is also the largest shareholder of CoBeverage Labs SL, a fresh juice manufacturer supplying Southern Europe. JP’s specialty food interests include its Tortuga subsidiary, through which JP operates a Jamaica-based bakery that supplies Tortuga Rum and Spirit cakes to over 15 countries. 
• JP Snacks Caribbean, a subsidiary of JP is a leading regional producer of tropical snacks. JP Farms, Jamaica’s leading banana farm, is the largest private sector employer in St. Mary, Jamaica. JP Group’s logistics interests include Kingston Wharves Limited, a regional multipurpose port, Geest Line Limited, a UK based shipping line connecting European, Caribbean and Latin America markets, and JP Shipping Services a freight forwarding and logistics enterprise based in the UK. 
• This investment in the Dominican Republic will allow JP to tap into this lucrative market while leveraging its expertise in the food and drink business. The Dominican Republic, which was one of the fastest growing countries prior to the pandemic, is expected to grow by 8.2%  in 2021 and 4.8% in 2022, as a swift national vaccination campaign and resilient private consumption drive domestic activity.

 (Source: JSE News, Fitch Solutions & NCBCM Research Team)