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Canadian Annual Inflation Rate Doubles As Central Bank Sees Faster Growth Published: 23 April 2021

  • Canada's annual inflation rate doubled to 2.2% in March, Statistics Canada said on Wednesday, as the central bank signaled economic slack would likely be absorbed earlier than it had previously forecast.
  • Previously, the Bank of Canada had said it would be 2023 before inflation returned sustainably to its 2% target. On Tuesday, the central bank said it would happen in the second half of next year. In the meantime, inflation would temporarily breach its target, the bank said.
  • Part of the March price bounce is due to a statistical effect caused by a sharp deceleration last year during the coronavirus pandemic, Statscan said. The bank also held its key overnight interest rate at a record low of 0.25% as expected.
  • Analysts polled by Reuters had expected the annual rate to rise to 2.3% in March, up from 1.1% in February. Energy prices gained 19.1% on a year-on-year basis, while inflation excluding gasoline and food rose 0.9% versus a year ago.
  • "The headline spike, as expected, is largely an energy story, but there are some signs that underlying pressures are starting to show up," said Nathan Janzen, senior economist at the Royal Bank of Canada.
  • The bank now expects Canada's economy will grow 6.5% in 2021, up from its January forecast of 4.0%, with real GDP growth of 3.7% in 2022, down from a previous forecast of 4.8%.

(Source: Reuters)

GOJ Looking At Contingency Plan For Tourism Sector Published: 22 April 2021

  • The Government is looking to develop a contingency plan designed to pilot the tourism industry’s recovery from the economic fallout sparked by the COVID-19 pandemic.
  • Tourism Minister, Hon. Edmund Bartlett said that this is in recognition that some of the partners and stakeholders in the sector are experiencing some “cash crunch difficulties” as a result of COVID-19.
  • He said the plan is intended to facilitate the provision of or access to funding “should there be any systemic COVID-19-related issues with their financial arrangements”.
  • This is being mapped out in tandem with players in the private sector and capital markets. The minister also noted that several financial institutions transacting business with stakeholders experiencing challenges have been “very responsive” to their plight.
  • As institutions in the capital markets, such as NCB Capital Markets, develop creative financing solutions for those cash-strapped companies in the tourism industry, investors will also get access to a more diverse pool of assets that will yield higher returns relative to traditional investments.

(Source: JIS & NCBCM Research)

Vaccine Roll-Out In Tourism Source Markets To Boost Barbadian Recovery Published: 22 April 2021

  • The accelerated roll-out of COVID-19 vaccines in key tourism source markets will bolster the rebound of Barbadian exports in the quarters ahead. Overall, Fitch Solutions forecast exports to grow by 11.8% y-o-y in 2021.
  • As of April 20, the UK and US, which accounted for 32.9% and 30.7% of long-stay arrivals in 2019, had vaccinated the second and fourth-largest share of their population in the world.
  • That said, as the vaccination programs in both countries continue to accelerate, the agency expects demand for tourism in Barbados to increase significantly.
  • The return of tourism activity will boost private consumption in the quarters ahead. Firms in the tourism industry, which accounted for 33.4% of total employment in 2019, will begin rehiring workers to meet renewed demand, which will boost household incomes and thereby private consumption. The average unemployment rate is expected to fall to 15.0% in 2021, down from an estimated average of 27.0% in 2020.
  • As a result, Fitch Solutions has revised its 2021 and 2022 real GDP growth forecasts to 3.1% y-o-y and 3.5%, respectively, from 2.4% and 3.2%, previously.

(Source: Fitch Solutions)

Nicaragua To Rein In Public Deficit In 2021 Alongside Economic Recovery Published: 22 April 2021

  • A recovery in revenues and restrained spending will see Nicaragua’s public deficit narrow to 2.0% of GDP in 2021, from 2.5% in 2020.
  • Spending will continue to be focused on social programs and healthcare expenses, in addition to hurricane reconstruction efforts.
  • The Nicaraguan government will prioritize gradual fiscal consolidation moving forward, as US sanctions limit its options for financing its deficits.

(Source: Fitch Solutions)

Oil Down 2% on Talk of Imminent Deal for Iran to Export Crude Again Published: 22 April 2021

  • Oil prices fell as much as 2% on Wednesday on talk of a nuclear deal by May for Iran that would take U.S. sanctions off the Islamic Republic’s crude exports, potentially adding another two million barrels per day or more to the market.
  • Crude futures were already down earlier in the day after a somewhat bearish weekly dataset on petroleum supply-demand released by the U.S. Energy Information Administration. Further depressing the market was news from wire agencies that indirect talks between Iranian and U.S. negotiators, held in Vienna through European intermediaries, were bearing fruit.
  • The report added that the United States was open to lifting terror sanctions against Iran’s central bank, its national oil and tanker companies and several key economic sectors including steel, aluminum, and others.

(Source: Investing.com)

Britain Shows Fledgling Signs Of Economic Recovery Published: 22 April 2021

  • Britain is showing signs of economic recovery from the COVID-19 pandemic as it gradually relaxes its latest lockdown measures, according to a range of timely and forward-looking indicators.
  • The world's fifth-biggest economy shrank by almost 10% in 2020, a more severe slump than almost all its European peers after it locked down later and for longer than many of them.
  • But helped by the fast rollout of COVID-19 vaccinations, it is in the process of lifting its third lockdown while other countries in Europe have recently tightened restrictions.
  • Non-essential retailers in England reopened on April 12 along with pubs and restaurants operating outdoors, and from May 17 restrictions will be lifted further to include indoor hospitality, performances, and sporting events.

(Source: Reuters)

Jetcon Reports Net Loss In FY2020 Published: 21 April 2021

  • For the financial year ending December 2020, Jetcon incurred a net loss of $6.73Mn when compared to the net profit of $60.30Mn in FY2019. The weaker performance reflects a falloff in revenues (-38.7% or $$396.65Mn) as the COVID-19 induced recession, weighed on the demand for motor vehicles.
  • To mitigate losses and boost sales, the company had to furlough staff temporarily during the second quarter, cut prices on some vehicles, and introduce new sales initiatives.
  • With the focus on cost reduction, indirect expenses dropped by 6.1% (or $4.25Mn), while direct expenses fell by 38.4% or ($341.77Mn) over the period.
  • Management is optimistic about 2021, given the rollout of vaccinations locally, which will be a major determinant of the pace of economic recovery. Management also gave early guidance that vehicle orders and sales for the first quarter of 2021 have grown year over year (YoY). The prospective economic rebound will be accompanied by a reduction in unemployment, which when combined with the low-interest-rate environment, will support the demand for motor vehicles and help drive sales. However, return to pre-pandemic sales volumes is unlikely to materialize in 2021.
  • Since the start of the year, Jetcon’s stock price has appreciated by 1.2% to close trading at a price of $0.80 per share and currently trades at a price to book of 0.4x which is below the Junior Market Distribution Sector Average of 5.2x.

(Source: Jetcon’s Financials)

Guyanese Government To Implement Fiscal Stimulus Amid Tense Political Landscape Published: 21 April 2021

  • Guyanese President Irfaan Ali will use the country's revenue windfall from crude oil production to increase social spending and public investment in the coming quarters, which may bolster support for his People’s Progressive Party/Civic (PPP).
  • Since taking office, Ali’s administration has largely focused on increasing public expenditures in budgetary proceedings and overseeing the country’s COVID-19 response, as the previous government could not enact significant fiscal stimulus in 2020.
  • The PPP passed a GYD383.0Bn (USD1.8Bn) annual budget in March 2021. This budget, which increases public spending by 16.1% y-o-y from the emergency GYD330.Bn 2020 budget, enacted in September, passed on a straight-line party vote.
  • However, ongoing tensions between the PPP and the opposition A Partnership for National Unity and Alliance for Change coalition will persist, driving political polarization and preventing bipartisan policymaking. That said, Fitch Solutions gives Guyana a score of 54.4 of out 100 in its Short-Term Political Risk Index (STPRI), which places it 24th out of 26 markets in the Caribbean, largely due to low 'social stability' scores.

(Source: Fitch Solutions)

Cayman Islands Will Face More Difficult Policymaking Environment After April 2021 Snap Election Published: 21 April 2021

  • A more fragmented Parliament following the April 14 snap election in the Cayman Islands will limit policymaking over the coming quarters, particularly as no legislator has been able to form a governing coalition.
  • As a result, Fitch Solutions has revised the country’s Short-Term Political Risk Index score down to 68.1 out of 100, from 69.8 previously. This reflects the agency’s weaker assessment of the government's 'policymaking environment' due to the potential for a fragile coalition and gridlock, as well as greater risks to policy continuity.
  • While the next Caymanian government is unlikely to deviate from the current policy direction, the legislature's granting of greater autonomy as a British Overseas Territory in December 2020 will allow for more policymaking discretion.

(Source: Fitch Solutions)

Fed Will Limit Any Overshoot Of Inflation Target, Powell Says Published: 21 April 2021

  • The U.S. economy is going to temporarily see "a little higher" inflation this year as the recovery strengthens and supply constraints push up prices in some sectors, but the Federal Reserve is committed to limiting any overshoot, Fed Chair Jerome Powell said in an April 8 letter to Senator Rick Scott.
  • "We do not seek inflation that substantially exceeds 2 percent, nor do we seek inflation above 2 percent for a prolonged period," Powell said in a five-page response to a March 24 letter in which the Florida Republican raised concerns about rising inflation and the U.S. central bank's bond-buying program.
  • Those modifiers - "substantially" exceeding 2% inflation or above that level for a "prolonged" period - help to more sharply define the upper bounds of the Fed's comfort zone as prices rise. "I would emphasize, though, that we are fully committed to both legs of our dual mandate - maximum employment and stable prices," Powell said.
  • The Fed slashed its benchmark overnight interest rate to near zero last March after the coronavirus pandemic hit the United States, and has promised to leave borrowing costs unchanged until the economy reaches full employment, and inflation hits 2% and is on track to "moderately" exceed that level for some time.
  • Fed policymakers are expected to stick with the super-easy monetary policy at a meeting next week, even as the economy strengthens and increasing COVID-19 vaccinations make a return to more normal life in the United States likely in 2021.

(Source: Reuters)