• Influenced primarily by an 8.1% contraction in the Services Industry, Jamaica’s GDP declined by 5.7% in the first quarter of 2021 when compared to Q1 2020. 
• The pandemic and the measures implemented to stem the spread continue to weigh on service delivery and as such all sectors within the Services Industry reported a falloff in output, with the exception of the Producers of Government Services which was effectively flat at 0.1%. The largest reduction was seen in the hotels and restaurants industry (-56.2%) due to the 71.9% reduction in stop-over arrivals and the sustained suspension of cruise activities. 
• The Goods Producing Industry on the other hand grew by 3.0% mainly due to increased output levels in Construction (+12.6%) reflecting growth in both the Other Construction and Building Construction components. Growth in Mining & Quarrying (+6.2%) was also a major contributor to the expansion in the goods-producing industry outturn due to increased production of both alumina and crude bauxite. However, the Agriculture, Forestry & Fishing and Manufacturing industries declined by 2.0% and 1.4%, respectively owing to the impact of adverse weather conditions and decreases in both the Food, Beverages & Tobacco and the Other Manufacturing sub-industries. 
• Despite the current negative YoY quarterly performance, real GDP is projected to increase within the range of 7.0% to 9.0% YoY during the April–June 2021 quarter (PIOJ). The forecast is driven by the commencement of the recovery process relative to the low output levels recorded in the corresponding period of 2020, the relaxation of some COVID-19 containment measures compared to a year ago and increased domestic demand due to continued expansion in employment level. Furthermore, the continued roll-out of vaccination programmes globally augurs well for the world economy and a strengthening of external demand for Jamaica’s goods and services.

Source: (PIOJ)

• The Senate has approved legislation to formally merge the functions of the Agricultural Marketing Corporation (AMC) under the Agro-Investment Corporation (AIC). The Bill seeks to formalize the relationship between the AIC and the AMC by amending the Agro-Investment Corporation Act to entrust the functions of the AMC to the AIC and repeal the Agricultural Marketing Corporation Act. 
• The Bill also seeks to strengthen the effectiveness of the AIC by increasing its membership and diversifying the qualifications and skill sets of the members. A further increase in the functions of the AIC, including empowering the entity to mobilize and manage a pool of funds to be used to enhance the competitiveness of Jamaican agriculture in the domestic and global markets is also part of the objective of the bill. 
• The Bill was led by Minister of State in the Ministry of Foreign Affairs and Foreign Trade, Hon. Leslie Campbell, who said the merger is consistent with the Government’s Public Sector Master Rationalization plan, which is aimed at creating a more efficient and effective public sector by merging public bodies that share synergies of functions and resources.

(Source: JIS)

• It is expected that the Banco Central de la República Dominicana (BCRD) will begin to hike interest rates in the coming quarters as economic activity strengthens and inflation remains elevated. The BCRD is expected to modestly raise its benchmark interest rate to 3.25% by end-2021, from the current 3.00%, as the economic recovery gains pace. 
• In 2020, the BCRD cut interest rates by 150 basis points (bps) to 3.00%, a historic low, in an effort to prop up economic activity throughout the COVID-19 pandemic. The BCRD also implemented additional measures to bolster domestic liquidity, extending approximately DOP$215.0Bn (around 5.0%) in liquidity provisions as of its May 2021 meeting. 
• However, elevated inflation will also prompt the Central Bank to begin a rate-hiking cycle.  Inflation is forecast to average 6.4% in 2021, well above the BCRD’s 3.0-5.0% target inflation range. In the year through April, higher transport costs have pushed monthly inflation to average 7.8% y-o-y, from 2020's average of 3.8%.  
• Additionally, higher global energy and food prices, which have had an outsized impact on the Dominican consumer price index basket, could extend this trend in the coming months.  
• However, if price growth significantly decelerates in the coming months and global monetary conditions remain accommodative, the BCRD may delay rate hikes until 2022.

(Source: Fitch Solutions)

• In the second round of Peru’s presidential election held on June 6, leftist Pedro Castillo currently holds a narrow lead of 50.2%, over right-wing candidate Keiko Fujimori, who has received 49.8% of the vote, with approximately 95.0% of the vote counted. Castillo, who finished first with 18.9% of the first-round vote on April 11, consistently held polling leads since mid-April. 
• Fitch Solutions expected Castillo would win the presidency, and the extremely close vote tallies are in line with expectations and previous run-off elections in Peru. In 2011 and 2016, Ollanta Humala and Pedro Pablo Kuczynski won in the second round with less than 52.0% of the vote, with both candidates defeating Keiko Fujimori. 
• This suggests enduring polarization within the Peruvian electorate and the ongoing disapproval of Keiko Fujimori and the popular force (FP) among a large chunk of the voting population, though concerns over Castillo's left-wing platform likely prompted some voters to back Fujimori.  
• If Castillo is confirmed as the winner, it will pose significant risks to policy continuity, as Castillo campaigned on uprooting the country’s business-friendly economic model and raising taxes and royalty rates on extractive sector companies. If Castillo maintains his lead, Peruvian assets will also likely sell off further, exacerbating the Peruvian sol (PEN)'s recent depreciation to historic lows against the US dollar in Q2 2021.

(Source: Fitch Solutions)

• The Federal Reserve is in the early stages of a campaign to ready markets for reducing its $120 billion in monthly asset purchases to stimulate the economy. 
• Comments by Fed officials in the past several weeks suggest the issue of tapering looks likely to be discussed as soon as the Federal Open Markets Committee meeting next week, and the Fed may be on track to begin asset reductions later this year or early next year. 
• At least five Fed officials have publicly commented on the likelihood of those discussions in recent weeks, including Patrick Harker, president of the Federal Reserve Bank of Philadelphia, Robert Kaplan of Dallas, Fed Vice Chair for bank supervision Randal Quarles and Cleveland Fed President Loretta Mester, whose comments to CNBC came after Friday’s monthly jobs report. 
• While the discussion may take place, an announcement of a decision to actually taper would be several months later, perhaps in late summer or early fall. That announcement would then put the beginning of the asset reduction further out, perhaps by year-end or early next year. Since the Fed will taper its purchases, that is, reduce the amount it buys by some amount each month, that timeline would still see the Fed purchasing billions of dollars of assets well into 2022, though at an increasingly slower pace.

(Source: CNBC News)

• The weaker-than-expected April jobs report fueled speculation of U.S. labour shortages and led some state officials to declare an early end to enhanced unemployment benefits.
• Yet forecasters hoping for clarity from the May tally may be left scratching their heads. 
• It’s hard to draw conclusions about sustained weakness or labour supply issues from the data published Friday, according to economists. The May report offers something of a mixed bag and somewhat contradictory data points, they said. 
• For example, there’s the headline number: The U.S. economy added 559,000 people to payrolls in May. On one hand, some observers may use the data point to suggest workers aren’t rejoining the labour force as quickly as one might expect. 
• The jobs figure was below economists’ estimate of 671,000. At that pace, it would take more than a year to regain all the jobs lost since February 2020.

(Source: CNBC News)

• CAC 2000 Limited (CAC) and Tropical Battery Company Limited (TROPICAL), both listed on the Junior Market of the Jamaica Stock Exchange, announced the joint formation of ENRVATE Limited on April 29, 2021. 
• ENRVATE will adopt a unique approach to establishing energy saving solutions for commercial customers in Jamaica and the Caribbean by focusing on real-time measurement and monitoring of energy consumption and using the resulting data to identify, design, and execute energy and water saving opportunities. 
• The goal is to work with customers to achieve minimum savings of 25%, with the ultimate achievement being NET ZERO consumption. Enrvate plans to develop innovative financing solutions for qualified customers through the issuance of a Green Bond along with equity capital. ENRVATE  officially started offering its product and services as at June 1, 2021. 
• Both companies stated that they are passionate about the planet, people, and profits, and anticipate that this 50-50 partnership will help them achieve their goals faster. Furthermore, the joint venture is in line with CAC’s strategy to develop complementary partnerships to become a leading expert in energy and Indoor Environmental Quality. 
• We believe the partnership provides value to both entities, as it will support revenue diversification. Most businesses and consumers in the region are looking for ways to reduce energy costs to improve earnings and stretch disposable incomes.

(Source: Jamaica Stock Exchange)

• Minister of Tourism, Hon Edmund Bartlett, says ground is to be broken for 3,000 hotel rooms over the next few months. Speaking at a virtual ground-breaking ceremony for the new Sandals Dunn’s River Resort in St. Ann, on May 26, the Minister also noted that he recently concluded, in Spain, arrangements for another 1,000 rooms. 
• “I am excited about the prospect of where we are going with the industry in this round. Already for the year, we have welcomed just a little over 400,000 visitors and we have earned some US$500Mn of foreign exchange for Jamaica,” Mr. Bartlett explained. This is below the 574,131 tourist arrivals recorded for the same period in 2020, which is solely made up of arrivals reported in January to March as the border was closed to foreigners in April and May to limit the spread of the pandemic. Notably, the total visitors thus far in 2021 is greater than the 306,273 visitors to the island from June to December 2020. 
• In the meantime, Mr. Bartlett indicated that Jamaica’s tourism sector is undergoing a renewal process, and that this new tourism is going to drive a greater level of “inclusiveness” that will further benefit the local economy. He said there will be more indigenous Jamaican programmes, experiences and entrepreneurships to strengthen and build the new tourism product.

(Source: Jamaica Information Service)

• Panama's current account is expected to return to a deficit in 2021 and the years thereafter, although the shock of COVID-19 severely depressed Panamanian trade and narrowed the goods trade deficit. 
• High domestic consumption and a large construction industry make Panama a major importer of consumer goods, capital goods and fuels, which has historically resulted in persistent current account deficits. However, a collapse in imports in 2020 pushed the current account balance to an estimated surplus of 0.1% of GDP. 
• As the economy recovers in 2021 and the years thereafter, the agency expects the current account deficit will stabilize around 3.5% of GDP in the second half of the forecast period. Capital inflows will be enough to sustain the shortfall, as the country's ease of doing business and dollarization continue to make it attractive to international investors.

(Source: Fitch Solutions)

• During Friday’s sitting of the House of Representatives, the Prime Minister, Hon. John Briceño, stated that the negotiations with the Creditor Committee representing the holders of Belize’s Superbond are still ongoing. The Superbond amounts to over U.S.$556.4Mn dollars, and makes up 40% of the sovereign’s total external debt. 
• 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. Prior to that, a scheduled call between bondholders and the Minister of State in the Ministry of Finance was cancelled. At that time, the bondholders had stated that no progress could be made in the renegotiation of the debt unless Belize signs on to an IMF standby agreement. 
• During Friday’s House meeting, PM Briceño stated, “Our position remains steadfast; there will be no IMF standby program, because there is no need for an IMF program. The government knows what must be done to restore economic and fiscal health, and our 2021/22 national budget is proof-positive that we are acting with purpose and a clarity to restore equilibrium to the public finances.”

(Source: Amandala)