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Consultations Underway to Address Gaps in Tourism Supply Chain Published: 22 June 2021

  • Preparations are in high gear to enable Jamaican producers to better meet the demands of a revived tourism industry. The Ministry of Tourism is working in tandem with the Ministry of Agriculture & Fisheries and has initiated a series of high-level meetings to finalize the requisite arrangements.
  • Two crucial meetings were held at the Montego Bay Convention Centre on the weekend with representatives from the agricultural sector: One meeting involving the Jamaica Hotel and Tourist Association (JHTA), to discuss the supply chain for meat and meat cuts, and agricultural produce, and the other with the Jamaica Manufacturers and Exporters Association, exploring supply chain issues.
  • The Minister of Tourism noted that the discussions were “in the vein of reimagining tourism in the wake of the COVID-19 pandemic and to drive the new production and consumption patterns that we require to enable more local Jamaicans to be connected to the tourism value chain.” This is aimed at ensuring that a larger percentage of the tourism dollar stays in Jamaica and more jobs are created.
  • He expressed confidence that tourism was showing signs of recovery “…and this is why we’re moving so fast to bring the partners together because the pandemic brought tourism literally to a halt and what it meant is that we were all at point zero, and this is a good time to bring the partners together so that we build back together.”

(Source: JIS)

Brazil's External Accounts To Benefit From Multi-Year High Commodity Prices Published: 22 June 2021

  • Brazilian goods exports are likely to surge to historic highs in 2021 on the back of multi-year high commodity prices.
  • Fitch previously highlighted that a widening current account deficit and persistent shortfalls in capital inflows would create a significant risk of external account pressures over the coming quarters that would weaken the real and cut into reserves. 
  • However, exports have outperformed expectations, and as such, its current account forecast for 2021 was revised to a deficit of 0.6% of GDP, from 2.3% previously. Following this the deficit will widen to 2.6% in 2022. 
  • This revision reflects a surge in commodity prices to multi-year highs in H1 2021 as the global recovery takes hold, which has driven up Brazil's export earnings far more significantly than anticipated.

(Source: Fitch Solutions)

US Unlikely To Grant Venezuela Sanctions Relief Published: 22 June 2021

  • On June 18, Venezuelan President Nicolás Maduro used a TV interview with Bloomberg Television to ask the Biden administration to ease sanctions on his regime, citing their humanitarian cost. Maduro also stated he plans to restructure the government’s US$60.0Bn in outstanding debt if sanctions are lifted. 
  • On June 20, the US State Department indicated that any shift in US policy would require major changes in Venezuela, including a path to free and fair elections and the restoration of political rights. 
  • The Biden administration’s dismissal of Maduro’s request for sanctions relief is in line with Fitch’s view that the US will not adjust its approach to Venezuela unless the Maduro government offers significant concessions around electoral conditions, such as allowing international observers or moving presidential elections forward from 2024. 
  • With or without a change in stance from the US, Fitch maintains its view that a window for talks between the Venezuelan government and opposition exists. Guaidó has recently adopted a more pragmatic stance that would include negotiations with the Maduro government, which he had previously rejected. 
  • Talks would likely centre on electoral conditions and opposition participation in local elections scheduled for November. Given the opposition’s growing acceptance that its ‘all-or-nothing’ approach has failed and the Venezuelan government’s desire to both appeal to the US and to have the opposition legitimize the upcoming elections by participating, the agency sees scope for compromise in the coming months.

(Source: Fitch Solutions)

NY Fed's Williams: Economic Conditions Have Not Progressed Enough For Central Bank To Shift Stance Published: 22 June 2021

  • The U.S. economy is rebounding rapidly from the crisis caused by the coronavirus pandemic, but more progress is needed before the Federal Reserve should begin to scale back some of the robust support it is providing, New York Fed president John Williams (NYSE: WMB) said on Monday. 
  • The recent inflationary pressures appearing as some businesses struggle to keep up with a surge in demand should also subside as the economy stabilizes, the Fed official said. "It’s clear that the economy is improving at a rapid rate, and the medium-term outlook is very good," Williams said in remarks prepared for a virtual event with the Midsize Bank Coalition of America. "But the data and conditions have not progressed enough for the FOMC to shift its monetary policy stance of strong support for the economic recovery." 
  • Bolstered by rising vaccinations and strong fiscal support, the U.S. economy could grow by 7% this year after adjusting for inflation, Williams said. The rapid opening of the economy is creating imbalances between supply and demand and leading to temporary price increases, but inflation could level off over time, he said. Williams said he expects inflation to come down from around 3% this year to close to 2% next year and in 2023. 
  • With more than 7 million jobs lost when compared to before the pandemic, the U.S. economy still has a long way to go before it is back at full strength, the policymaker said. Further job gains are expected, but it could take time for employers to fill open positions, he said.

(Source: Reuters)

Euro Zone And U.S. Economies In "Different Situation", ECB's Lagarde Says Published: 22 June 2021

  • The euro zone and the United States are "clearly in a different situation" when it comes the outlook for inflation, European Central Bank President Christine Lagarde said on Monday, playing down any impact from across the Atlantic. 
  • With the U.S. economy reopening and prices rebounding fast, Federal Reserve officials have started discussing ending their bond purchase programme and last week brought forward their expectations for the first rate hike since the start of the coronavirus pandemic. 
  • This has triggered market speculation about rising inflation and a tightening of monetary policy across the globe. But Lagarde rejected comparisons between both economies, saying the U.S. recovery was farther ahead of the euro zone's. 
  • She acknowledged that there would be some "spillovers" from rising inflation in the United States through higher import prices, stronger exports and potentially even euro zone citizens' expectations about inflation. "Overall, however, the effects on euro area HICP inflation are expected to be moderate," she added. 
  • She added the ECB estimated a cumulative impact of 0.15 percentage point on inflation and of 0.3 percentage point on growth between 2021 and 2023 in the euro zone from the U.S. stimulus package, reaffirming the bank's March projections.

(Source: Reuters)

The LAB Records Increase in Net Profit as Production and Media Businesses Buoy Revenue Growth Published: 18 June 2021

  • For the 6-month period ending April 2021, The LAB reported a net profit of $113.56Mn (EPS: $0.12), a 31.0% (or $26.89Mn) increase over H1 2020 on the back of brisk growth in operating revenue (31.3%) and a $11.72Mn rise in net finance income. 
  • Revenue growth was supported by an expansion in both the production and media segments of the business, which saw increases of 83% (or $106.70Mn) and 18% (or $43.50Mn), respectively. 
  • This was enough to outweigh the 28.0% rise in the company’s indirect expenses and 36.3% increase in direct costs. The higher indirect costs were reflective of greater staff costs due to increased work volume, repairs and maintenance of production equipment, and depreciation and amortization charges. Despite the increase, total expenses as a percentage of revenue remained relatively flat at 16.2% compared to 16.7% in the previous period. 
  • Since the start of the year, the LAB’s stock price has increased by 2.2% to close trading at $3.13 at the end of June 17, 2021. At this price, the stock trades at a P/E of 19.6x earnings, which is below the junior market average of 24.3x earnings.

(Source: Company Financials)

Jamaica to Benefit from Initial 25 Mn Doses of COVID-19 Vaccines to Be Donated By US Published: 18 June 2021

  • Jamaica is poised to benefit from the United States’ donation of an initial 25Mn doses of COVID-19 vaccines that have been earmarked for deployment globally, to assist in easing challenges with access being experienced by a number of countries. 
  • This was disclosed by Minister of Foreign Affairs and Foreign Trade, Senator the Hon. Kamina Johnson Smith, who said that representatives of the Government had discussions with US Secretary of State, Antony Blinken, among other officials, during which assurances were given that the region would be assisted with vaccines “at a point in time”. 
  • Senator Johnson Smith indicated that Jamaica has also participated in discussions facilitated through CARICOM in relation to securing supplies from the initial 25Mn vaccine doses. “We have not yet had a confirmed quantity. But we continue to liaise as they work out the different formulas that they use, on guidance from Caribbean Public Health Agency (CARPHA)… taking into consideration the rate of transmission which is taking place in the various islands,” she said. 
  • This bodes well for the country’s road to economic recovery, which will be dependent on the government’s ability to secure sufficient vaccines to inoculate the population and achieve herd immunity. This would allow for a faster pace of reopening of the economy and is essential if the country is to experience a V-shaped recovery. 
  • Jamaica’s vaccination programme, though underway, would need to pick up pace to allow for greater relaxation of restrictive measures intended to curb the spread of the virus, and foster a return to normality. To date, 1.1% Jamaican’s have been fully vaccinated and 5.5% have received one dose compared with 22.1% and 31.3% in Barbados, and 44.2% and 52.6% in the US.

(Source: JIS; NCBCM Research)

Rebounding Revenues, Spending Cuts To Narrow Bermuda's Fiscal Deficits Published: 18 June 2021

  • Bermuda’s fiscal deficit will narrow in FY2021/22 (April 2021-March 2022) as an economic recovery drives renewed revenue growth and the government reins in COVID-19 relief spending. 
  • The deficit widened substantially in FY2020/21 to 4.1%, up from an average of 2.1% from FY2015/16 to FY2018/19, as an estimated 7.5% contraction in GDP amid the pandemic, significantly undermined revenues. The deficit also increased on account of additional government spending to the tune of US$127.3Mn in emergency spending. This is equivalent to 11.3% of FY2019/20 expenditures and was part of the government’s strategy to mitigate the health and economic impacts of the pandemic. 
  • Fitch Solutions has revised its budget deficit forecast for FY2021/22 to 2.1% of GDP, from 2.4% previously. 
  • Total public debt is also forecasted to decline to 48.5% of GDP by end-2025, from a peak of 55.6% in 2020, as fiscal consolidation flips the primary fiscal balance into surplus beginning in FY2022/23.

(Source: Fitch Solutions)

More Interest Rate Hikes In Brazil As Inflation Outpaces Expectations Published: 18 June 2021

  • On June 16, 2021, the Brazilian Central Bank (BCB) raised the Selic (policy rate) by 75bps. It is anticipated that it will hike its benchmark Selic target interest rate to 6.25% by the end of 2021, an upward revision from Fitch Solutions’ previous forecast of 5.00%. 
  • The revision reflects inflation that has continued to surprise to the upside over recent months, which has pushed up market expectations for hikes and led the BCB to adopt a more hawkish policy stance. 
  • The June 2021 interest rate hike was the central bank's third consecutive hike and in line with the guidance provided with its prior decision.  
  • The agency forecasts that inflation will average 7.70% through the end of 2021, well above the 5.25% upper target, due to rising electricity costs, high commodity prices and supply constraints. 
  • Risks to the forecasts remain to the upside, given the likelihood of volatile market sentiment and the potential for elevated inflation to become sticky.

(Source: Fitch Solutions)

U.S. Labour Market Healing Despite Unexpected Rise In Weekly Jobless Claims Published: 18 June 2021

  • The number of Americans filing new claims for unemployment benefits increased last week for the first time in 1-1/2 months, but layoffs are easing amid a reopening economy and a shortage of people willing to work. 
  • While other data on Thursday showed factory activity in the mid-Atlantic region continuing to grow at a steady pace in June, a measure of future production surged to its highest level in nearly 30 years. Factories in the region that cover eastern Pennsylvania, southern New Jersey and Delaware also reported stepping up hiring, which bodes well for job growth this month. 
  • Initial claims for state unemployment benefits rose 37,000 to a seasonally adjusted 412,000 for the week ended June 12, the Labour Department said. That was the first increase since late April. Economists polled by Reuters had forecast 359,000 applications for the latest week. 
  • The economy, ironically, is facing a labour crunch despite employment remaining 7.6 million jobs below its peak in February 2020. A shortage of childcare facilities is keeping some parents, mostly women, at home.

(Source: Reuters)