• It is projected that Jamaica will run a current account surplus in the quarters ahead as remittance inflows and rebounding tourism activity widen the country’s secondary income surplus and services trade surplus, respectively. 
• A sluggish economic recovery will constrain Jamaican demand for imported goods, slowing the goods trade deficit’s return to pre-pandemic levels. 
• As such, Fitch Solutions has revised its 2021 current account surplus forecast to 1.0% of GDP, from its previous forecast of a 1.4% deficit, and its 2022 forecast to a 0.5% surplus, from a 1.4% deficit, due to the continued strength of remittance inflows and the 2020 deficit being narrower than previously expected. Remittances trended upward throughout 2020 increasing by 25% to reach its highest annual total of US$2,678.80Mn. This trend has continued in 2021 thus far rising by 70.0% in March 2021 to US$305.2Mn relative to March 2020.

(Source: Fitch Solutions & BOJ)

• GWEST reported net profit of $21.19Mn (EPS: $0.05), a significant improvement when compared to the $47.50Mn (EPS: -$0.10) net loss incurred over the same period last year. This is also the first time that the company is reporting a net profit in three years. Investors reacted positively, as the stock appreciated by 20.0% following the release. 
• The positive outturn was due to an increase in other gains (+85.1% or $43.33Mn), coupled with contractions in admin expenses (-19.4% or $13.24Mn), other operating expenses (-16.1% or $15.73Mn) and finance costs (-18.3% or $8.30Mn). The company also recorded a significant increase in tax credit, which moved from $6.40Mn in 2019/20 to $19.26Mn in 2020/21, helping to bolster its bottom-line. 
• The strong bottom-line performance occurred despite a contraction in overall revenues (12.4%) given a significant fall-off (35.9% or $27.09Mn) in revenues from medical services, which outpaced the growth achieved (+20.7% or $11.09Mn) in revenue from lease rental. 
• The increase in other gains was fueled by fair value gains on investment property which amounted to $101.46Mn relative to $65.76Mn in 2020. Meanwhile finance costs declined due to lower interest on bank loans, lease liabilities and bank overdraft interest. 
• GWEST stock price has appreciated by 36.1% since the start of the year, and closed Tuesday’s trading session at a price of $1.02 per share. At this price, the stock trades at a P/E ratio of 20.4x earnings, which is below the junior market sector average of 24.1x earnings.

(Source: Company Financials)

• Fitch has shifted its monetary policy outlook for Latin America as several major central banks in the region have either begun to hike their benchmark interest rate, or have primed markets for H2 2021 tightening through changes in their forward guidance. 
• In 2020, Latin American central banks slashed interest rates to all-time lows in response to the economic impact of the COVID-19 pandemic. Central banks across the region further eased credit conditions by cutting reserve requirements and launching extraordinary lending facilities to ensure the smooth flow of credit to household and businesses, with the aim of preventing financial instability amid the health and economic crises. 
• At the beginning of 2021, Fitch expected nearly all central banks in Latin America would keep interest rates at historic lows through the end of the year, with the lone exception of the Banco Central do Brasil (BCB). However, it now expects that central banks in Chile, Colombia and Mexico will tighten monetary policy in 2021, and as such has revised up its end-year interest rate forecast for the BCB to 6.25%, from 5.00% previously. 
• The BCB has already hiked its benchmark rate by 225 basis points (bps) to 4.25% in June in response to above-target inflation and volatile market sentiment. A similar, though less aggressive, story has played out in Mexico, in which the Banco de Mexico (Banxico) carried out a surprise, 25bps hike at its June meeting after an inflation print for the first half of the month came in well-above target. 
• While these forecasts represent a significant change in Fitch’s monetary policy outlook for the region, it sees further upside risks to the forecast. The continued acceleration of inflation in the US could push the US Federal Reserve to bring forward its monetary policy normalization, which would likely prompt capital outflows from risky assets. Latin American central banks would likely respond with more hikes than is currently anticipated in an effort to stem outflows.

(Source: Fitch Solutions)

• Pan American Health Organization (PAHO) Director Dr. Carissa F. Etienne praised the Government of the United States on the imminent delivery of millions of doses of COVID-19 vaccines to countries in the Caribbean and Latin America in the coming days though COVAX. The PAHO Revolving Fund is facilitating these deliveries in close collaboration with recipient country governments. 
• “Latin America and the Caribbean are the epicenter of this pandemic globally, and donations like these are the most effective path to get vaccines that are unavailable through the market to the arms of people that desperately need them now.” 
• “We are advocating for access to vaccine donations through COVAX and directly,” added Dr. Etienne. “Working with the COVAX Facility, governments, producers and other partners, we have been able to deliver more than 21 million doses to 31 countries in Latin America and the Caribbean, but the reality is that we still face a glaring gap in access to vaccines”.
• In addition to the U.S., the Director has also thanked the government of Spain for donating 5 million COVID-19 vaccine doses for the region, as well as the government of Canada for its $50 million Canadian dollars commitment to expand access to COVID-19 vaccines in the region. 
• Countries in Latin America and the Caribbean are consistently reporting some of the highest case counts in cases and deaths around the world, with hospitals at their limit. Only just around 11% of the entire population of the Caribbean and Latin America combined have completed their vaccination schedule, with some countries still not being able to vaccinate more than 1% of their populations. Therefore, additional donations of vaccine doses will help countries in the region, including Jamaica, to inoculate more of their population and ease restrictions and bolster greater commercial activity.

(Source: PAHO)

• Federal Reserve Bank of Richmond President Thomas Barkin said the U.S. labour market isn’t close to its pre-pandemic levels and he wants to see much more progress before slowing central bank asset purchases. “I still think we’ve got a long way to go on the job front,” Barkin said Tuesday in a broadcast interview with MNI Market News, pointing out that employment was 7.6 million below the pre-COVID-19 level. 
• Further employment gains will be needed before tapering bond purchases, the Richmond Fed leader said, even as inflation has risen more than the central bank’s 2% target. The policy-setting Federal Open Market Committee has pledged to keep buying $120Bn in Treasuries and mortgage-backed securities every month until there is “substantial further progress” on the committee’s goals. 
• The employment-to-population ratio hasn’t recovered since falling early last year as Americans left the workforce, Barkin said. Workers may have left for a variety of reasons, including enhanced unemployment insurance, child care issues with children at home, and worries about health due to the pandemic, he said. 
• Fed officials will be focused on Friday’s employment report as the latest gauge of progress. Payrolls may have risen by 700,000 in June, according to the median estimate in a Bloomberg survey of economists. That would be the biggest increase since March. 
• Barkin’s view was echoed by Fed Minneapolis President Neel Kashkari, who said the U.S. economy has a long way to go to fully recover from the pandemic but he expects employment to pick up after the summer months.

(Source: Bloomberg)

• Oil prices steadied on Tuesday as broad hopes for a demand recovery persisted, fueled by comments from OPEC's secretary general, slightly overshadowing travel curbs due to new outbreaks of the highly contagious Delta variant of the coronavirus. 
• Brent crude futures settled up 8 cents, or 0.1%, at $74.76 a barrel, having slumped by 2% on Monday. U.S. West Texas Intermediate (WTI) crude futures settled up 7 cents, or 0.1%, at $72.98 a barrel, after a 1.5% retreat on Monday. 
• Demand in 2021 was expected to grow by 6 million barrels per day (bpd), with 5 million bpd of that in the second half, OPEC Secretary General Mohammad Barkindo told Tuesday's meeting of the Joint Technical Committee of OPEC+, an alliance made up of OPEC states, Russia and their allies. 
• "The current 'wild card' factor is the 'Delta Variant' of the pandemic that is resulting in rising cases and renewed restrictions in many regions," he said in a speech, a copy of which was seen by Reuters. The producer group is expected to gradually ramp up production in response to demand. 
• OPEC's demand forecasts show that in the fourth quarter global oil supply will fall short of demand by 2.2 million bpd, giving the producers some room to agree to add output. The market expects the rollout of vaccination programmes to brighten the demand outlook, even as the new variant rises, analysts said.

(Source: Reuters)

• For its audited financial year ending March 2021, FESCO reported a modest year on year increase in net profit (3.2%) to $108.16Mn (EPS: $0.043). 
• Revenues fell by 1.4% (or $82.82Mn), reflecting the effects of the restrictions on mobility due to the COVID-19 containment measures on the demand for gasoline. However, direct costs fell by 1.7% (or $96.06Mn) which saw gross margin improving for the third consecutive year to 3.3% in 2021 from 3.0% in 2020. 
• However, operating and admin expenses grew by 10.1% (or $5.44Mn), along with impairment losses on financial assets (55.0% or $268.15Mn), but they were not enough to offset the gains earned from the decline in direct costs. As such, its operating income still grew by 6.1% (or $7.54Mn). 
• FESCO’s performance is likely to continue to be hampered by the closure of schools and work from home in the near term. However, the recent easing of restrictions should support more social activities and travelling influencing higher demand for gasoline. Additionally, the planned resumption of in-person schooling in September 2021 should foster an increase in the demand for fuel. That being said, another spike in new cases later this year which forces the government to reinstitute stricter containment measures, would constrain revenue growth. 
• FESCO’s stock price has appreciated by 47.5% since listing at its IPO price of $0.80.  At its last closing price of $1.18, the shares currently trade at a P/E of 27.0x earnings. This is largely in line with the junior market distribution sector average of 27.1x earnings.

(Source: Company Financials & NCBCM Research)

• Prime Minister, the Most Hon. Andrew Holness, expects that come August, Jamaica should receive additional supplies of coronavirus vaccines. He said these would enable more persons to be vaccinated, particularly those categorized in priority groups. 
• “We are expecting that we will continue to vaccinate our older population, our critical workers – healthcare workers, police force, military, and our teachers,” Mr. Holness stated. He added that “the plan is that… by September [when the 2021/22 academic year starts] we should be able to return to school [for] face-to-face [instructional delivery].” 
• Holness underscored the importance of teachers getting vaccinated in preparation for the full resumption of face-to-face education. “For us to reopen, we need teachers to be vaccinated. It is possible to have schools still operating even in the pandemic, particularly the senior grades. One critical criteria for me, would be to see that all our teachers are vaccinated.” 
• A reopening of schools in September would augur well for companies in the food and beverage and transportation industry as there will be increased demand for food and drinks by students, and more commute increasing vehicular activities.

(Source: JIS & NCBCM Research)

• Following a sharp fall in Q220 amid the onset of the COVID-19 pandemic, commodity prices have experienced a strong rally as rebounding global economic activity has fueled increased demand. However, rallies for several commodities have reversed in recent weeks, reflected in the sharp fall in the Bloomberg Commodities Index. 
• The US dollar has strengthened in the wake of the US Federal Reserve's June 16 meeting, at the expense of several commodities, which are largely priced in the unit. Similarly, the Chinese government’s decision to release strategic metals reserves, combined with increased production globally as public health restrictions have eased, have weighed on prices for metals such as copper. 
• Falling metals prices could limit the pace of the economic recovery in Chile and Peru, which rely heavily on copper exports. Fitch’s Commodities team forecasts copper prices to fall to US$9,000/tonne by end-2021, from a peak of US$10,747/tonne in May, averaging US$8,370/tonne for the year. 
• Slowing Chinese growth has begun to weigh on demand for agricultural goods such as soybeans, which has seen its price decline significantly in recent weeks. Brazil and Argentina are the region’s largest producers, though Uruguay and Paraguay export soybeans as well. Fitch’s Commodities team forecasts the price of soybeans to average US$1,350/bushel in 2021, from an average of US$1,434/bushel in the year to date. 
• Additionally, aluminum prices have risen by 46.0% to US$2,486/metric tonne since the start of the year, from the average of $1703/mt in 2020. The deceleration in Chinese growth could also cause a falloff in aluminum prices for the rest of the year, but the consensus by the IMF and World Bank is for aluminum prices to rise to $2,004/mt in 2021 relative to 2020, which should still augur well for income growth in the Jamaican mining and processing sector this year.  
• In comparison, energy prices have continued to climb, and Fitch forecast Brent prices to average US$66.0/bbl and US$64.0/bbl in 2021 and 2022, respectively, up from US$43.2/bbl in 2020. The sustained bump in energy prices could benefit oil producers such as Colombia, Bolivia, Trinidad, and Ecuador, by encouraging increased foreign investment in their extractive sectors.

(Source: Fitch Solutions, NCBCM Research)

• Belize’s opposition United Democratic Party has seen a number of internal fights in recent weeks, weakening its already fragile political position. As a result, the ruling People’s United Party (PUP) faces few formal constraints on its ability to address Belize’s poor fiscal situation. That being said, the risk of social unrest will limit the pace of consolidation. 
• Belize’s fiscal deficit is expected to narrow to 9.7% of GDP in FY2021/22, from 11.7% in FY2020/21, while total government debt will reach 129.5% in FY2021/22 before declining thereafter. 
• While talks with creditors around reducing the principal owed for the 2034 ‘superbond’ are ongoing, the government is unlikely to meet its target of reducing public debt to 85.0% of GDP by 2025. On May 20, the country defaulted on a scheduled coupon payment given the critical state of the public finances, the severe impacts of the pandemic and the consequent rigid budget recently approved by this Parliament.

(Source: Fitch Solutions)