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Costa Rican Economy Will Contract In 2020, With Limited Long-Term Upside Published: 29 July 2020

  • Fitch Solutions forecast that real GDP in Costa Rica will contract 4.0% y-o-y in 2020 due to the economic impact of the Covid-19 pandemic and tightening fiscal policies. This is a revision from the previous forecast of a 3.1% decline.
  • A weak global economy will limit exports and inbound investment, while rising unemployment will undermine private consumption over the coming quarters.
  • While Fitch forecasts that the Costa Rican economy will return to 3.1% growth in 2021, they noted the possibility of a second wave of Covid-19 in Costa Rica, or a prolonged recession in the US, as downside risks to their outlook.

(Source: Fitch Solutions)

FOMC To Debate Clarifying Rates Path, QE: Decision-Day Guide Published: 29 July 2020

  • Confronting signs that the U.S. economy may be losing momentum, Federal Reserve policymakers will turn their attention to how to jumpstart a stronger rebound from the virus-induced recession.
  • The Federal Open Market Committee is all but certain to keep its benchmark overnight rate in a target range of 0% to 0.25%, where it has been since March 15 to help soften the pandemic’s blow. The committee will release a statement at 2 p.m. and Chair Jerome Powell will hold a press conference 30 minutes later. Quarterly forecasts are not due to be updated at this meeting.

(Source: Economic Times)

Japan Government Sees Economy Shrinking This Year On COVID-19 Hit Published: 29 July 2020

  • Japan’s government expects the economy will contract this year as activity slowly recovers from the coronavirus crisis, with a return to growth seen next year, four government sources told Reuters.
  • The world’s third-largest economy is expected to have contracted 23.9% in the second quarter as the pandemic slammed global demand and Japan’s state of emergency prompted people to stay at home and businesses to close. Preliminary GDP data will be released on Aug 17.
  • Reflecting uncertainty over how long the pandemic will last, the government will take the unusual step of announcing several growth scenarios for 2020 and 2021 this week, based on whether the pandemic will end quickly or be prolonged. Real GDP is expected to shrink in the current fiscal year through March 2021 under either scenario, but it would be smaller than a 5% contraction, one of the sources said.

(Source: Reuters)

Proven Finishes Financial Year End Strong With Revenue Growth Published: 28 July 2020

  • For the year ended March 31, 2020, Proven Investment Limited reported an audited net profit attributable to shareholders of US$29.98Mn (EPS: US 4.79 ¢), up 337.8% (or US$23.13Mn) relative to the prior year.
  • This favorable outcome can be attributed to the 86.2% (or US$32.51Mn) increase in total income primarily due to a one-off US$24.93Mn gain from the disposal of Access Financial Services. This increase along with a US$9.13Mn rise in the share of profit from associates outstripped the 45.1% (or US$11.79Mn) growth in total operating expenses.
  • If this one-off gain from the sale of the subsidiary is removed, the profit attributable to shareholders is US$8.70Mn relative to the non-normalized profit of US$29.98Mn.
  • Proven’s stock has fallen 28.6% since the start of the year and closed Monday’s trading session at $33.21. At this price, the stock trades at a P/E of 5.2x earnings, which is below the Main Market Financial sector average of 13.9x earnings.

(Source: PIL Financials)

US$4.875M Climate Resilience Fisheries Project Launched Published: 28 July 2020

  • More than 40,000 local fisheries stakeholders are poised to benefit from the implementation of the ‘Promoting Community-based Climate Resilience in the Fisheries Sector Project’ by the Ministry of Industry, Commerce, Agriculture, and Fisheries (MICAF).
  • The US$4.875Mn five-year World Bank-funded initiative aims to enhance climate-resilient practices among targeted fishing and fish-farming communities across Jamaica in a bid to strengthen the sector through several engagements.
  • Minister without Portfolio in MICAF, Hon. Leslie Campbell noted that over the past two years, the sector contributed US$79Mn to Jamaica’s gross domestic product (GDP), with exports totaling more than one tonne.

(Source: JIS)

Post-Election Standoff In Guyana Underscores Significant Risks Published: 28 July 2020

  • President David Granger’s refusal to concede the March 2020 election and leave office will heighten political risks in Guyana in the coming weeks.
  • While Fitch’s core view remains that Granger will eventually step down and allow the opposition People’s Progressive Party/Civic (PPP) to assume control of the government, they note the possibility of increased sanctions by the US and other governments if Granger remains in power.
  • Fitch Solutions has revised Guyana’s score in the Short-Term Political Risk Index to 48.0 out of 100, from 54.3 previously, as the government’s refusal to verify the election results or leave the office to underpin the possibility of political violence.

(Source: Fitch Solutions)

Fitch Affirms Banco Atlantida's IDRs at 'B+'; Outlook Revised to Negative; Invatlan Placed on RWN Published: 28 July 2020

  • Fitch Ratings has affirmed Banco Atlantida, S.A.'s (Atlantida) Long-Term (LT) Issuer Default Ratings (IDRs) at 'B+', and revised the outlook from stable to negative.
  • Fitch also placed both Inversiones Atlantida’s (Invatlan) LT and ST IDRs, each at 'B', and the US$150Mn senior secured notes 'B'/'RR4' on Rating Watch Negative (RWN).
  • The negative outlook on Atlantida LT IDRs reflects the increased downside risks from the economic implications of the coronavirus pandemic. Fitch believes that although the ultimate impact of the weaker economic conditions is yet unclear; this could materially affect the banks' financial performance.
  • Invatlan's RWN reflects the delay in the delivery of the audited 2019 financial information due to operational issues with the external auditor derived from the pandemic, according to management.

(Source: Fitch Ratings)

GOP Relief Plan Slashes Unemployment Benefits By 43% For Average Worker Published: 28 July 2020

  • Unemployment benefits would be cut by nearly half in a new plan proposed by Senate Republicans. The policy would replace a $600-a-week federal boost, which lapsed over the weekend in all states, with a reduced benefit of $200 a week.
  • The plan would pay the new $200 subsidy through September. In October, that would be replaced by a different formula capping total state and federal jobless benefits at 70% of lost wages.
  • That amounts to a 43% cut in total benefits when compared with the prior, $600-a-week policy, a temporary measure enacted in March under a federal relief law. The proposal would impact nearly 32 million Americans currently receiving unemployment benefits — about five times the level of the Great Recession more than a decade ago.

(Source: CNBC)

U.S. Manufacturing Sector Regaining Momentum, But Surging Virus Cases Threaten Recovery Published: 28 July 2020

  • New orders for key U.S.-made capital goods increased by the most in nearly two years in June and shipments accelerated, but the gains were likely insufficient to avert the deepest plunge in business investment and economic activity since the Great Depression in the second quarter because of the COVID-19 crisis.
  • Orders for non-defense capital goods excluding aircraft, a closely watched proxy for business spending plans, jumped 3.3% last month, the Commerce Department said. That was the biggest increase in these so-called core capital goods orders since July 2018 and followed a 1.6% rise in May.
  • The improvement in manufacturing reported by the Commerce Department on Monday was driven by pent-up demand following the reopening of businesses.

 (Source: CNBC)

Bearish On Jamaican Dollar Amid Widening Current Account Deficit, Poor Growth Outlook Published: 24 July 2020

  • The Jamaican dollar (JMD) will depreciate over the coming months due to a widening current account deficit and loose monetary policy.
  • In the long term, Fitch expects the JMD to weaken steadily as a slow economic recovery weighs on investors’ expected returns and the Bank of Jamaica (BOJ) continues to reduce its participation in the foreign exchange market.
  • Fitch revised its 2020 forecast average to JMD144.0/USD, from JMD139.3/USD previously, and its 2021 forecast to JMD149.0/USD, from JMD143.2/USD.

 (Source: Fitch)