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DBJ to Disburse $8.49Bn in Loans for 2021/22 Published: 18 March 2021

  • The Development Bank of Jamaica (DBJ) plans to disburse $8.49Bn in loans during the 2021/22 fiscal year. It will provide financial and non-financial products to micro, small and medium-sized enterprises (MSMEs) through credit guarantees, debt and equity financing, and institutional capacity-building.
  • This will expand and improve MSMEs’ access to finance and business development assistance giving them the room to fund expansion or improve competitiveness, increase contribution to GDP and facilitate more job creation.

(Source:  JIS & NCBCM Research)

Moody's Downgrades Panama's Ratings To Baa2, Changes Outlook To Stable Published: 18 March 2021

  • On March 17, 2021, Moody's Investors Service downgraded the Government of Panama's long-term issuer and senior unsecured debt ratings to Baa2 from Baa1. Moody's also changed the outlook to stable from negative.
  • The very material deterioration in Panama's fiscal strength driven by the severe economic shock from the pandemic was behind the downgrade. While most sovereigns have experienced some diminution in their fiscal strength, in Panama's case the erosion has been unusually large relative to rating peers.
  • The stable outlook balances Panama's high economic growth potential and relatively favorable funding conditions against the challenges the authorities will face in adopting policies to arrest the upward debt trend and ultimately support fiscal consolidation.
  • This marks the second downgrade of the sovereign since the start of the year. Last month, Fitch rating agency downgraded the sovereign to BBB- (one notch below the current Moody’s equivalent rating of Baa3), also on account of the severe weakening of public finances due to the economic disruption caused by the coronavirus pandemic.
  • Given the sharp deterioration in Panama's fiscal strength, upward rating pressure is limited. However, if Moody's were to conclude that fiscal consolidation efforts would prove insufficient to prevent a further deterioration in Panama's fiscal strength relative to its peers, this would add negative rating pressure. Additionally, if economic growth is below estimates, this could weigh on the fiscal accounts and exert further pressure on Panama's credit profile and its sovereign rating.

(Source: Moody’s Investor Service)

Tourism Growth To Drive Recovery In Dominica Published: 18 March 2021

  • Economic activity in Dominica will return to growth in the quarters ahead as the rollout of vaccinations in tourism source markets boosts tourism activity.
  • Private consumption will also recover as tourism activity and loosened public health restrictions boost employment.
  • Fitch Solutions has revised its real GDP forecast for 2021 to 3.0% y-o-y, from 2.1% previously, due to base effects and the sooner-than-expected availability of COVID-19 vaccines.

(Source: Fitch Solutions)

Lockdown, Trade Woes Stunt UK Economy Ahead Of 2021 Recovery Published: 18 March 2021

  • Britain's economy has endured a torrid start to 2021, hit by a new COVID-19 lockdown and disruption caused by the country's less open trade relationship with the European Union.
  • While better days are ahead, Bank of England officials meeting ahead of Thursday's monetary policy announcement must weigh up the likely strength of the recovery, the lasting damage caused by the pandemic, and how much inflation might result.
  • The latest official data showed Britain's economy contracted in January, although not by as much as feared by some economists. Output remained 9% below its level in February 2020.
  • Tax office estimates of the number of employees on payrolls showed tentative signs of recovery in January. But they remain more than 700,000 below the pre-pandemic norm.

(Source: Reuters)

Fed Sees Growth Surge, Jump In Inflation In 2021 But No Change On Rates Published: 18 March 2021

  • The Federal Reserve on Wednesday repeated its pledge to keep its target interest rate near zero for years to come after projecting a rapid jump in U.S. economic growth and inflation this year as the COVID-19 crisis winds down.
  • The U.S. central bank now sees the economy growing 6.5% this year, which would be the largest annual jump in the gross domestic product since 1984, and the unemployment rate falling to 4.5% by year's end. This is higher than the GDP growth and unemployment rate projections of 4.2% and 5%, respectively, made in December.
  • The pace of price increases is now expected to exceed the Fed's 2% target for the year, hitting 2.4% by year's end before falling back in 2022.
  • "Indicators of economic activity and employment have turned up," the central bank's policy-setting Federal Open Market Committee said in a statement that kept the benchmark overnight interest rate in a target range of 0% to 0.25%.
  • The improvement in the Fed's economic outlook did not immediately alter policymakers' expectations for interest rates, though the weight of opinion did shift. Seven of 18 officials now expect to raise rates in 2023, compared to five in December.

(Source: Reuters)

IDB Commits US$75Mn to Boost Jamaica’s COVID-19 Response Published: 16 March 2021

  • Jamaica’s capacity to combat the coronavirus pandemic has been further boosted through a US$75Mn loan commitment from the Inter-American Development Bank (IDB).
  • According to the IDB communiqué, the provision is earmarked to strengthen the efficiency and effectiveness of public policy and fiscal management, in response to the health and economic crises resulting from COVID-19.
  • The allocation is intended to promote the availability and timely execution of public resources to respond to the pandemic. It will strengthen the countercyclical effect of fiscal policy through the introduction of temporary measures to protect the income of vulnerable households and increase liquidity for businesses during the crisis.
  • The loan is also intended to promote post-COVID-19 economic and fiscal recovery. It will help finance cash transfers to employees, grants to low-income informal workers, vulnerable groups, and the unemployed, and provide student loan relief. Additionally, it is aimed at supporting small-business grant programs, especially in the tourism sector, and measures to strengthen fiscal institutions to improve efficiency and transparency of public investment.

(Source: JIS)

Inflation Remains Low in February & Slightly Below Target Published: 16 March 2021

  • The All-Jamaica Consumer Price Index (CPI) declined by 0.1% for February 2021 contributing to the lowest point-to-point inflation rate (3.8%) since October 2019.
  • A 1.3% fall in the index for the heaviest weighted division, ‘Food and Non-Alcoholic Beverages’ was the main driver of the decline in consumer prices. However, increases of 1.4% in the index for the ‘Housing Water, Electricity, Gas and Other Fuels’ division and 0.5% in the index for the ‘Transport’ division tempered the decline in the CPI.
  • Electricity rates rose in February due to new tariff rate changes for JPS approved by the Office of Utilities Regulation (OUR). Further, the index for the ‘Transport’ division advanced by 0.5% due to higher petrol prices supported by the vaccine-led recovery in global oil prices
  • Consumer prices actually fell for the calendar year-to-February ( -0.1%), while the point-to-point (February 2020 – February 2021) rate was 3.8%, falling just below the lower bounds of the Bank of Jamaica’s (BOJ) inflation rate target of 4%-6%.
  • Despite the current low inflation rate and expectations for continued weakness in domestic demand, the BOJ forecasts inflation to average 5.4% this year. This is being driven by expectations for a potential increase in agricultural food prices, higher international commodity prices as the global economy recovers and the effects of the increases in regulated utility prices. 

(Source: Statin)

Aruba Long-Term Ratings Lowered to 'BBB' From 'BBB+' On Weaker Economy and Higher Debt; Outlook Stable Published: 16 March 2021

  • On March 15, 2021, S&P Global Ratings lowered its long-term foreign and local currency sovereign credit ratings on Aruba to 'BBB' from 'BBB+'. The outlook was revised to stable.
  • Aruba has the largest exposure to the tourism of any sovereign rated by the agency. Furthermore, the severe hit to the country's economy by the COVID-19 pandemic and its aftermath is expected to be more prolonged than anticipated. S&P also expects the government will rely more heavily on borrowing to fund its expenditures, pushing debt levels higher.
  • The stable outlook considers the economic and fiscal challenges the country faces, alongside the support afforded by the agreement reached between it and the Netherlands in late 2020. 
  • The agreement underscores the Netherlands' strong commitment to providing concessionary financial assistance to Aruba while laying the groundwork for reforms and aiming to limit the severity of the effects of the pandemic.
  • Aruba is highly vulnerable given its lack of economic diversity and high dependence on the Kingdom of the Netherlands for support. That being said, the continued support from the kingdom bodes well for the country’s credit profile. Notwithstanding, if the effects of the pandemic continue to weigh on the fiscal accounts this could weaken Aruba’s creditworthiness further.

(Source: S&P Global Ratings & NCBCM Research)

Brazil Economy Its Largest Since 2015, Central Bank Activity Index Shows Published: 16 March 2021

  • Brazilian economic activity rose sharply in January, a central bank index showed on Monday, indicating that Latin America’s largest economy has not only recovered all its pandemic-related decline but is now back to the size it was over five years ago.
  • The IBC-Br economic activity index, a leading indicator of gross domestic product, rose a seasonally adjusted 1.04% in December, more than double the 0.4% increase forecast in a Reuters poll of economists.
  • The seasonally adjusted index in January stood at 140.3, higher than the 140.02 from February last year before the COVID-19 pandemic brought the economy to a standstill and triggered the biggest annual decline in activity since 1990. That is also the highest level since May 2015, according to central bank data.
  • Despite the strong start, the outlook for this year remains uncertain, as a deadly second wave of the pandemic sweeps the country, unemployment remains high, and emergency government aid to millions of poor people approved by Congress last week will be only a fraction of last year’s payments.

(Source: Reuters)

China’s Economic Activity Soars, but Masks Year-Long Uneven Recovery Published: 16 March 2021

  • Economic activity in China soared during the first two months of 2021, but recovery remains uneven a year after the country imposed draconian lockdowns around this time in 2020. National Bureau of Statistics (NBS) data released earlier in the day said that industrial production grew 35.1% year-on-year in February, above the 30% growth in forecasts prepared by and the previously recorded 7.3% growth.
  • Retail sales also soared 33.8% year-on-year in February, against the predicted 32% growth and the previously recorded 4.6% growth. The unemployment rate was at 5.5, higher than the previously recorded 5.2%.
  • The spectacular growth rates of more than 30% for key indicators in the data are largely attributable to distortions when compared to 2020’s lockdowns. It also indicated a rebound happening at uneven rates, with strong industrial output and export demand against lagging consumer recovery.
  • China is the only major economy to have returned to economic growth after imposing 2020’s lockdowns as COVID-19 spread. Soaring global demand for medical goods and work-from-home devices has also given the recovery a boost.
  • The economy grew 2.3% in 2020 and is forecast to expand 8.4% in 2021, although the recently-ended National People’s Congress set a more modest growth goal of “above 6%.” There are also signals that the government will gradually scale back COVID-19 stimulus measures.