• The Jamaican Dollar (JMD) will continue to weaken against the U.S dollar (USD) in 2021 as the country’s domestic tourism industry faces a slow recovery, which will limit USD inflows. 
• However, over the long-term, a stronger outlook for growth and tourism will limit the JMD’s depreciation, but elevated inflation, dovish monetary policy and persist current account deficits will keep the unit on its long-range depreciatory path. 
• Fitch Solutions has revised its 2021 average forecast for the Jamaican Dollar to JMD$150.50/USD, from JMD$149.90/USD previously, as it expects weaker tourism activity will keep the unit in a weaker trading range in the near term. The revised forecast implies that the unit will trade 5.7% below the JMD$142.40/USD average in 2020. 
• However, barring another spike in COVID-19 cases, we expect the gradual recovery witnessed in the tourism sector thus far to strengthen in H2 2021 supported by the robust vaccination programmes and economic recovery in source markets, to influence greater USD inflows and reduce the pace of depreciation of the JMD.

(Source: Fitch Solutions & NCBCM Research)

• It is anticipated that the ruling, centre-left People’s National Movement (PNM) in Trinidad & Tobago (T&T) will continue to cut public expenditures in line with a long-term push towards fiscal consolidation. 
• Due to negative impact of the COVID-19 pandemic on government revenues, T&T’s fiscal deficit ballooned to 11.8% of GDP in 2020, from 3.2% in 2019, while total public debt rose to 68.9% in 2020, from 55.3% in the year prior. 
• In response, the PNM passed a 2021 budget that cut public expenditures, largely through an extension of public sector wage freezes, which should allow expenditure to decline by an estimated 5.7% in 2021. 
• However, the recent surge in COVID-19 cases and subsequent public health restrictions may increase political pressure for government assistance, potentially limiting PNM’s fiscal consolidation drive. 
• Although this risk exists, Fitch Solutions maintains T&T‘s score of 61.5 out of 100 in its Short-Term Political Risk Index (STPRI), due to the country’s below-average scores in the ‘policy-making process’ and ‘social stability’ sub-components of the STPRI.

(Source: Fitch Solutions)

• Colombia’s fiscal deficit will remain significantly wider than the historical average in 2021 as the government sustains higher public spending levels to support economic activity. 
• In 2020, the budget shortfall was 7.8% of GDP, the widest in over 30 years, as the COVID-19 pandemic depressed public revenues and prompted President Iván Duque’s government to enact countercyclical spending measures. For the year, revenues fell 11.2%, while expenditures increased 16.4%, which brought public spending to 23.0% of GDP, the highest in the last two decades. 
• However, as the Colombian economy recovers from the pandemic, it is expected that revenues will strengthen over the coming quarters. That being said, the 2021 budget will roll over many of the social spending programmes enacted by the Duque administration in 2020 that are intended to bolster incomes for unemployed and low-income Colombians. 
• Fitch Solutions forecasts that stronger revenues will bolster a fall in Colombia’s budget deficit to 7.5% of GDP in 2021 and 6.2% in 2022. 
• While it also expects the government will enact fiscal consolidation measures to adhere to longer-term deficit reduction in line with the 'fiscal rule', ongoing political uncertainty clouds its medium-to-long term outlook.

(Source: Fitch Solutions)

• Swiss investment bank Credit Suisse expects global growth to accelerate in the coming months as countries gradually reopen their economies, leading to a recovery in revenue growth and rehiring.
• In its investment outlook for the second half of 2021, Credit Suisse predicted the world economy will grow 5.9% this year and 4% in 2022. That growth will be led by vaccine rollouts, fiscal stimulus and a broadening services recovery. It also said the United States is set to grow at a rate of 6.9% this year, the Eurozone is expected to expand by 4.2% while Asia ex-Japan is predicted to grow 7.5%. 
• Economic expansion will likely lead to a sharp recovery in global earnings growth that is set to fuel the stock market, according to Ray Farris, chief investment officer for South Asia at Credit Suisse. 
• “We are looking for equities to be the asset class that is going to outperform over the next six months to a year,” Farris told CNBC’s “Squawk Box Asia” on Thursday. “As long as earnings continue to trend higher, history suggests that equities will grind their way up.”

(Source: CNBC)

• Confidence among Canadian exporters has surged to its highest level in more than 20 years, amid mounting optimism that a sustained global economic recovery is underway, a survey by Export Development Canada (EDC) showed on Thursday. 
• EDC's Trade Confidence Index jumped 19% from end-2020 to mid-2021, the largest 6-month increase since the survey began in 1999, the agency said. The recovery appears to be broad-based across all regions of the country, it said. 
• Canada's economy - like those of many of its global peers - is set to boom in the second half of 2021, as widespread public vaccinations allow businesses to reopen and consumers begin to dip into their pandemic savings. 
• A strong rebound south of the border is also expected to help. A growing share of companies reported orders from customers in the United States, Canada's largest trading partner, had improved in the past six months, EDC said. 
• And 65% of respondents said they are planning to export to new markets, with the UK and Australia top destinations. Exports account for about a third of Canada's gross domestic product.

(Source: Reuters)

• Minister of Labour and Social Security, Hon. Karl Samuda, says Jamaica must actively seek to implement transformative initiatives that can position the local labour force to generate and maintain sustainable productivity gains. 
• “This can be accomplished with careful attention to areas such as labour market reform, education, infrastructure that supports technology adoption, targeted investments in research and development as well as reallocating resources to higher value-added production,” Mr. Samuda said. 
• He maintained that as creative and innovative ways are identified to increase productivity during the pandemic, it is imperative to also bear in mind that “at [its] core is efficiency”. 
• “The more efficient we are with our labour, investment and natural resources, the more we can produce. Our goal is not to only produce more. We want to produce higher quantities and qualities of goods and services with every hour of labour, every dollar of investment, and every ounce of our natural resources,” the Minister added. 
• “As we continue to grapple with the impacts of the COVID-19 pandemic on the global economy, the Jamaica Productivity Centre will be working to strengthen partnerships with stakeholders and highlight potential solutions, success stories and best practices… and our next step to promote growth in the Jamaican economy,” he said.

(Source: JIS)

• Prime Minister, the Most. Hon. Andrew Holness on Tuesday (June 22) announced special measures for the reopening of the entertainment sector. The protocols were crafted by the Ministries of Health and Wellness, Local Government and Rural Development, and Culture, Gender, Entertainment and Sport, working in tandem with industry practitioners. 
• Holness, who was delivering a statement to the House of Representatives, said that at this stage, the Government is contemplating two categories of events – small events with no more than 100 persons in total, including organizers and support personnel, and large events of over 100 persons. 
• Organizers of small events may make applications for permits as they normally would through their local authorities, who will work with them to ensure that the protocols are in place for a safe event. The municipal corporations have agreed to reduce the cost for permits and licences by 50%,” he said. 
• For large events, such as stage shows, church conventions, conferences or crusades, festivals and related activities, organizers will be required to go through an additional layer of approval. “Organizers of large events must first send an application to the Ministry of Culture, Gender, Entertainment and Sport. The Ministry will review the application to see that it meets the requirements,” the Prime Minister indicated. 
• This reopening will support increased demand for the goods and services produced by listed companies in this sector such as KLE Group, Palace Amusement etc, which should positively influence their top and bottom-line. Companies in other sectors, such as manufacturers and distributors of alcoholic beverages and party items should also realize an improvement in profitability. 
• That being said, if social distancing protocols are not properly implemented and observed, there is an increased risk that it could influence another spike in cases and cause a re-tightening of restrictions.

(Source: JIS & NCBCM Research)

• The Mexican peso (MXN) will depreciate against the US dollar in H221, due to shifting expectations around the US Fed policy compared to a still accommodative Banxico in the short term, and investor uncertainty over economic policy direction in Mexico. 
• After a strong rebound from Q2 2020’s all-time lows, the peso has seen notable volatility in H1 2021, facing pressure from rising long-dated US bond yields in March. 
• Over the longer term it is forecast that the currency will modestly depreciate, weighed down by relatively weak economic fundamentals, such as low investment. The average exchange rate is expected to be MXN20.30/USD in 2021, slightly weaker than its previous forecast of MXN20.12/USD, to account for recent volatility. The unit will likely trade sideways to MXN20.50/USD at the end of 2021 and MXN20.80/USD at end-2022. 
• This depreciation will likely increase the value of debt held by corporates such as PEMEX which are heavily indebted and possess a large concentration of US denominated debt, making repayment more challenging, exacerbating poor liquidity issues.

(Source: Fitch Solutions & NCBCM Research)

• Argentine authorities are committed to reach an agreement with the International Monetary Fund no later than the end of March as part of an understanding with the Paris Club to avoid default, according to the group’s second-ranking official. 
• The country also agreed to treat all other external creditors in a comparable way as part of an accord with the group of wealthy nations in which it will make a partial payment, the Club’s Secretary General Schwan Badirou-Gafari said in an emailed response to questions. 
• “Given the commitments made by the authorities regarding the conclusion of an agreement with the IMF as soon as possible and not beyond end March 2022, as well as their commitment to comply with the comparability of treatment, Paris Club would be in a position to avoid declaring a default at end July,” said Badirou-Gafari. 
• Argentina announced on Tuesday that it would make a partial US$430Mn payment to the club to avoid a default after missing a US$2.4Bn payment that was due last month. 
• As part of the understanding, the country has until March 31 2022 to complete its restructuring with the Club, but Economy Minister Martín Guzmán said that deadline wasn’t going to have any impact on the timeline for IMF negotiations. 
• An IMF agreement would help the country to make policy and fiscal adjustments that will allow for a reduction in the country’s unsustainable debt levels. At the end of December 2020, the country’s government debt stood at 102.5% of GDP (CEIC data) and the government had defaulted on payments twice in 2020. According to Bloomberg, traders are almost certain that it will default once more in 2021.

(Source: BA Times & NCBCM Research)

• S. Treasury Secretary Janet Yellen on Wednesday warned Congress that the United States risks a debt default and a new financial crisis as soon as August if lawmakers fail to act quickly to suspend or raise the federal borrowing limit. 
• In testimony to a Senate Appropriations subcommittee, Yellen said defaulting on U.S. debt obligations would be "unthinkable" and "would have absolutely catastrophic economic consequences." 
• Yellen said that to avoid uncertainty for financial markets, Congress should pass new debt limit legislation - allowing the Treasury to continue borrowing - before the latest suspension expires on July 31. 
• A first-ever default on U.S. government debt obligations "would precipitate a financial crisis, it would threaten the jobs and savings of Americans at a time when we're still recovering from the COVID pandemic," Yellen said.

(Source: Reuters)