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Growth in The Dominican Republic Will Slow Towards Historic Trend in 2022 Published: 12 January 2022

  • Fitch Solutions forecast that growth in the Dominican Republic will slow to 4.8% in 2022, from an estimated 10.8% in 2021, as weaker external demand and tighter monetary conditions constrain economic activity. 
  • Nevertheless, the market will remain a regional outperformer, averaging 4.6% annual growth from 2023-2026, as tourism rebounds further and falling unemployment supports consumption. 
  • However, the global spread of the Omicron variant of COVID-19 presents downside risks to Fitch’s growth outlook, particularly if travelers in the US and other developed markets are more reluctant to travel to the Dominican Republic. 
  • The DR’s economy has rebounded at a faster pace than other Caribbean economies in recent quarters as swift COVID-19 vaccine roll-out, recovering labour market, and robust external demand has bolstered headline growth.

 (Source: Fitch Solutions)

Gradual Weakening of Mexico's Institutions Under AMLO Threatens Investor Sentiment Published: 12 January 2022

  • Mexican President Andrés Manuel López Obrador (AMLO)’s administration has taken actions in recent months that will weaken investor perceptions of the country’s independent economic and political institutions according to Fitch. 
  • This will suppress investment in Mexico over the coming years and has led to a further downward revision of the country’s Long-Term Political Risk Index score. In particular, the President’s efforts to nationalise the electricity sector clashes with the electoral body, personnel decisions at the Banco de México, and a decree fast-tracking major infrastructure projects. 
  • The overall trend in policy direction, underscored by these developments, will likely suppress investment in Mexico over the remainder of his term. In the near term, Mexico’s economy will remain highly vulnerable to sharp shifts in investor sentiment driven by further changes to the policy. 
  • Over the longer term, Fitch expects uncertainty will keep many investors on the sidelines, particularly in the electricity and oil sectors that AMLO has targeted. Despite investor concerns about his agenda, AMLO remains broadly popular, suggesting that he is unlikely to change course through the end of his term in 2024.

 (Source: Fitch Solutions)

U.S. economy can withstand Fed tightening, Omicron surge, Powell says Published: 12 January 2022

  • Federal Reserve Chair Jerome Powell said on Tuesday the economy should weather the current COVID-19 surge with only "short-lived" impacts and was ready for the start of tighter monetary policy. 
  • The Fed chief said the central bank was determined to ensure that high inflation did not become entrenched and that far from diminishing job growth, a turn to higher policy interest rates and runoff of its asset holdings was necessary to keep the current economic expansion underway. 
  • If prices continue spiking, the Fed could be forced to push through a sharper rise in interest rates this year than the three quarter-percentage-point hikes its policymakers currently anticipate, risking a return to recession. 
  • Powell noted that inflation is running very far above target and that the economy no longer needs or wants the very accommodative policies that have been in place. He further noted that with the Fed's benchmark overnight interest rate near zero and nearly $9.0Tn in assets on its books, it is a long road to anything close to restrictive policy, Powell said. 
  • Powell has said that in the meantime, Fed actions should not have negative effects on the labour market, noting that focus needs to be placed on getting inflation under control because maximum employment will not be obtained without price stability.

(Source: Reuters)

 

Omicron surge puts the brakes on recovery of U.S. companies Published: 12 January 2022

  • U.S. companies ranging from American Eagle to United Airlines are set for a tepid start to the year as the fast-spreading Omicron variant threatens to slow the fragile rebound in growth by exacerbating supply chain problems and labour shortages. 
  • The roll-out of COVID-19 vaccines and easing of restrictions last year had promised to be a boon for companies looking to recover from the heavy toll that the pandemic had taken on them. But the fast and relentless surge of Omicron-related infections has once again put sales and profits of companies under pressure. Staffing, customer traffic, and store operating hours have been hampered as the daily infections in the United States touched 1.35 million, the highest in the world. 
  • The first sign of its impact on Corporate America is the hit to sales over the recent weeks seen by companies such as American Eagle Outfitters, Abercrombie & Fitch, and Lululemon Athletica. 
  • The U.S. travel industry, a sector that has barely been able to get back on its feet, too has been jolted by staff shortages forcing cancellations of flights and cruises during the crucial holiday. American Airlines Group Inc expects cost per available seat mile to be up 13% to 14% compared to pre-pandemic levels, while United Airlines said it was reducing near-term flight schedules as about 3,000 employees have tested positive for COVID-19. 
  • However, some companies have stood to benefit. Pharmacy chain CVS Health Corp raised its 2021 profit view on expectations of higher demand for COVID-19 vaccines and over-the-counter testing, while Abbott Laboratories expects sales of its COVID-19 tests to stay strong in the near term.

(Source: Reuters)

Gov’t Maintaining Decision to Dispense with Lockdowns as Part of COVID-19 Safeguards Published: 11 January 2022

  • During the press conference held on Sunday, January 9, 2022, the Prime Minister, the Most Hon. Andrew Holness assured the public that the Government will no longer be resorting to lockdowns as part of strategies to contain COVID-19 transmission. 
  • This sentiment by the government should relay a positive signal to businesses as the absence of lockdown days means fewer disruptions to business activity.  It also signals to the public that while COVID-19 carries with it risk, broader vaccine availability and continued medical innovation should limit the impact of this and future outbreaks. 
  • With that said, each subsequent “wave” is expected to have less of an impact on consumer behaviour, financial markets, and the overall economy, as vaccine access and uptake become more widespread. Furthermore, businesses and households are expected to continue to look for ways to sustain their activities as they adapt to the new normal, given that COVID-19 will not disappear completely anytime soon. 
  • It is our view that rising caseloads in 2022 will not curtail economic activity to the same extent as in 2020 or early 2021. The lessons of the past two years have equipped governments and corporations to better manage outbreaks. These lessons, coupled with higher vaccination rates are unlikely to warrant extreme measures, such as complete border closures in 2022.

(Source: JIS and NCBCM Research)

Bahamas’ VAT Slash ‘Not Reckless’ As Revenues Up US$160Mn Published: 11 January 2022

  • The Ministry of Finance’s top official yesterday said the VAT rate cut “is not a reckless, populist act” as he revealed the Government has outperformed first-half revenue targets by US$160Mn. 
  • Simon Wilson, the financial secretary, defended the two-percentage-point rate slash as “a measured act to improve the livelihoods of ordinary Bahamians” that will have a “neutral to slightly” positive impact on government revenues during the second half of the 2021-2022 fiscal year. 
  • “Based on all the calculations, this reduction is going to be revenue-neutral and slightly positive in terms of revenue yield,” he told a press briefing at the Prime Minister’s Office. “It’s not going to increase the fiscal deficit. This is not a reckless, populist act.” 
  • Wilson declined to give figures for the estimated revenue and deficit impact as a result of cutting the VAT rate from 12 percent to 10 percent. However, he said the Government’s revenue performance had continued to maintain the 2021-2022 first-quarter trends where they were $92Mn ahead of forecast.

 (Source: The Tribune)

Venezuela's Inflation Hit 686.4% In 2021 Published: 11 January 2022

  •  Venezuela's annual inflation rate hit 686.4% in 2021, demonstrating a deceleration of consumer price growth versus the previous year when inflation was 2,959.8%, the country's central bank said on Saturday. Monthly inflation in December rose 7.6% and, since September, the inflation rate has remained in the single digits. 
  • The deceleration in prices follows government measures which include the restriction of credit and lower spending in bolivars to maintain the stability of the exchange rate.  As a result of this strategy, government entities and state-owned oil company PDVSA now pay suppliers in cash with foreign currency. 
  • During an interview broadcast on state television at the start of this month, Venezuela's President Nicolas Maduro said hyperinflation - which ran for four years - had been left behind. Despite measures to improve supplies and control inflation, prices remain high and continue to hit the earnings of Venezuelan families, limiting their ability to buy goods like food and medicine. 
  • In 2019, amid hyperinflation and economic collapse, Venezuela's government relaxed economic controls, allowing greater quantities of foreign currency to circulate, which provided some sectors with breathing space. The central bank has yet to publish data regarding the country's economic growth.

 (Source: Reuters)

U.S. Consumers' Inflation Expectations Unchanged In December, Survey Shows Published: 11 January 2022

  • Short-term inflation expectations held steady in December after rising steadily for more than a year and consumers became more optimistic about their job prospects, according to a survey released by the New York Federal Reserve on Monday. 
  • Median expectations for what inflation will be in one year were unchanged at 6.0% after 13 straight months of increases, according to the New York Fed's monthly survey of consumer expectations. Consumers' expectations of what inflation could be in three years also stayed steady at 4.0%. 
  • Consumers lowered their expectations for how much the prices of essential items will rise in the year ahead. They said they expect the price of gas to rise by 5.7% in a year, down from 9.2% in November, and for food prices to rise by 7.8%, down from 9.2%. 
  • Fed officials are considering whether they need to raise interest rates sooner than expected and may begin reducing their bond holdings later this year to respond to high inflation and a tight labour market. 
  • The New York Fed survey, which is based on a rotating panel of approximately 1,300 households, showed consumers are also more optimistic about the labour market. The perceived odds of losing a job over the next 12 months fell to an average of 11.6% in December from 12.9% in November. Additionally, the average perceived chance of being able to find a new job after becoming unemployed rose to 57.5% in December from 55.9% in November – reaching the highest level since the pre-pandemic level of 58.7% in February 2020.

(Source: Reuters)

Oil Steady As Supply Disruptions Offset Omicron Fears Published: 11 January 2022

  • Oil prices declined on Monday as supply disruptions in Kazakhstan and Libya weren’t enough to offset worries stemming from the rapid global rise in Omicron infections. Brent crude fell $1.00, or 1.22%, to $80.78 per barrel, and U.S. West Texas Intermediate (WTI) crude was down $0.84, or 1.06%, to trade at $78.07 per barrel. 
  • Oil prices gained 5% last week after protests in Kazakhstan disrupted train lines and hit production at the country’s top oilfield Tengiz, while pipeline maintenance in Libya pushed production down to 729,000 barrels per day from a high of 1.3Mn bpd last year. 
  • The fall of Azeri crude oil exports from Turkey’s Ceyhan port lent some support to prices. Oil is also drawing support from rising global demand and lower-than-expected supply additions from the Organization of the Petroleum Exporting Countries, Russia and allies, or OPEC+. OPEC’s output in December rose by 70,000 bpd from the previous month, versus the 253,000 bpd increase allowed under the OPEC+ supply deal which restored output slashed in 2020 when demand collapsed under COVID-19 lockdowns. 
  • A surge in COVID-19 infections, however, put pressure on oil prices. Despite early studies showing a lower risk of severe disease or hospitalisation from Omicron compared to the previously dominant Delta variant, healthcare networks across Spain, Britain, Italy, and elsewhere have found themselves in increasingly desperate circumstances.

(Source: CNBC News)

Equityline Group Announces A 176% Growth In Year-Over-Year Assets Under Administration (AUA) Published: 07 January 2022

  • EquityLine Group has announced a significant growth of assets under administration (AUA) of registered mortgages under contract with EquityLine Mortgage Investment Corporation (JSE:ELMIC), EquityLine Service Corp. and EquityLine Special Purpose Vehicle (SPV) Limited Partnership. Assets as of December 31, 2021, were $33.3Mn compared with $12.1Mn on December 31, 2020, a 176% year-over-year growth. 
  • EquityLine founder and CEO, Sergiy Shchavyelyev has noted that during 2021, EquityLine expanded its brokerage network, increased shareholder contributions and partnered with a Canadian Tier 1 Bank to launch an SPV Limited Partnership. These initiatives helped fuel the AUA growth in 2021. 
  • He further noted that EquityLine is well positioned to continue to grow AUA throughout 2022 while maintaining its conservative underwriting principles. 
  • As of September 2021, Equity Line reported a higher loss YoY despite an improvement in revenue. The higher revenue was tempered by an increase in interest and bank charges, unrealized foreign exchange loss and distribution to shareholders of redeemable preference shares. Notwithstanding, the increase in AUA should further support revenue growth.

 

(Sources: PIOJ & STATIN)