• The March 2021 survey indicated expected point-to-point inflation of 6.0% as at December 2021, which is higher than the March 2021 outturn of 5.2% and at the upper end of the BOJ target range. The expected inflation 12 months ahead fell to 6.5% from 7.2% in the previous survey.
• The perception of inflation control worsened in the March 2021 survey relative to the December 2020 survey. This was largely due to a decline in the proportion of respondents who were “satisfied”, and an increase in the proportion of respondents who were “dissatisfied” with how inflation is being controlled.
• Respondents anticipate that the currency will depreciate over the 3-month, 6-month, and 12- month time horizons at a faster pace relative to the previous survey, as activity in the domestic tourism industry remains depressed, limiting the supply of US dollars. US dollar supplies are not expected to improve significantly until a stronger rebound in the tourism industry begin to boost the Jamaican dollar.
• The majority of respondents continued to believe that the Bank’s policy rate will remain the same over the next three months, as the BOJ maintains that inflation will remain within in target over the next 12-months and that market interest rates will remain attractive - making it cheaper for households and businesses to finance their spending and investing activities. This should help to support growth.
• The Present Business Conditions Index improved while the Future Business Conditions Index worsened reflecting a lower level of optimism compared to the previous survey.

(Source: BOJ & NCBCM Research)

• Mexico’s economy extended its losing streak in March, shrinking by more than 2%. Analysts expect a rebound in subsequent months as the pandemic subsides and the country benefits from the spillover effects of economic stimulus in top trade partner, the United States.
• The Mexican economy contracted by 2.1% in March compared to the same month last year, preliminary data from national statistics agency INEGI showed on Monday, deepening Mexico’s economic woes.
• Latin America’s second-largest economy was already in a slight recession in 2019 and then contracted by 8.5% in 2020, its deepest dive in almost 90 years, because of the coronavirus pandemic. However, the economy recovered quicker than first estimated in the final quarter of 2020.
• Secondary activities, which include manufacturing, were down 0.9% for the month while tertiary activities such as services slid 3.1%, according to the INEGI estimate.
• A return to modest economic growth is forecast later this year for Mexico’s economy as the United States begins to implement a nearly $2 trillion economic stimulus package enacted by President Joe Biden and his congressional allies.

(Source: Reuters)

• On April 15, Colombian Finance Minister Alberto Carrasquilla formally introduced a tax reform proposal to Congress.
• The proposal will seek an additional COP23.4Tn (2.0% of GDP) in annual revenues beginning in 2022 to help bolster public finances, as the fiscal deficit has widened significantly due to a drop in government revenues and higher spending during the pandemic. Fitch Solutions estimates that the fiscal deficit reached 8.3% of GDP in 2020, from 2.5% in 2019.
• The proposal, which would boost revenues by a greater amount than previously expected, will likely be a starting bid in negotiations between the administration, Congress, business associations, and civil society groups.
• While Carrasquilla and President Iván Duque have long advocated for fiscal consolidation, the administration stresses that the reforms will help finance higher social spending and public investment.
• Increased taxes will reduce consumer and business purchasing ability, however, it will generate more revenues for the government and higher social spending can replace the purchasing power lost by increased taxes. This move is meant to jumpstart Colombia’s economic recovery.

 (Source: Fitch Solutions & NCBCM Research)

• Canada’s budget deficit is forecast to hit C$154.7Bn ($123.7Bn) in the fiscal year ending next March, as Ottawa spends heavily to counter the third wave of COVID-19 infections and plans to bolster the economic recovery, the finance department said on Monday
• The deficit is 27.6% higher than the C$121.2Bn forecast in a fiscal update last November. Ottawa unveiled a C$101.4Bn plan with spending commitments spread over three years and said it would extend COVID-19 benefits as well as bringing in a childcare program and tackling climate change. The spending, aimed at boosting economic growth, is also likely to appeal to voters ahead of an expected election later this year.
• The government said the 2020/21 deficit was now expected to be C$354.2Bn, down from a previous forecast of C$381.6Bn. It forecasts far narrower deficits of C$59.7Bn in 2022/23 and C$51.0Bn in 2023/24.
• The federal debt-to-GDP ratio is forecast to peak at 51.2% in 2021-22, down slightly from 52.6% seen in November, the highest since 1999, before declining to 50.7% and 50.6% in the subsequent two years.

(Source: Reuters)

• After fueling its V-shaped recovery by boosting spending on housing and infrastructure, China appears in no rush to drop its investment-led growth model despite international calls for it to “rebalance” its economy.
• First-quarter data released Friday underlined just how reliant China remains on its current approach: investment spending rose 6% compared with a 4.2% increase in retail sales, based on two-year average growth rates to strip out base effects from last year’s coronavirus lockdowns.
• The International Monetary Fund and others have long argued that China’s unusually heavy dependence on investment in infrastructure and property has led to an unbalanced economy. While it’s helped to fuel decades of rapid growth, critics say it’s also led to a reliance on debt -- which could spark a financial crisis -- and overcapacity in the economy, as has happened in the past in industries like steel and coal.
• Raising the share of household consumption would help to “rebalance” the economy, the argument goes. At about 43% of gross domestic product, China has one of the highest investment ratios of any major economy, while consumption is about 38%.

(Source: Bloomberg)

• COVID-19 containment measures continue to adversely impact passenger travel and Knutsford Express’s bottom-line. For the 9-months ending February 2021, the company reported a net loss of $60.63Mn (EPS: -$0.13) relative to a net profit of $103.18Mn (EPS: $0.21) over the same period last year.
• The deterioration reflects a 50.7% ($468.86Mn) decline in revenues to $456.37Mn. Revenues contracted as the ongoing pandemic continues to affect passenger travel negatively given ongoing curfews, reduced disposable incomes as well as passenger fears around public transportation.  Leveraging the available opportunities, the company expanded its courier services as the demand for e-commerce rose amid the pandemic.
• A 35.5% (or $282.89Mn) reduction in administrative expenses also helped to mitigate the impact of lower revenues on its bottom line.
• Knutsford’s investment in other revenue-generating measures, such as the recent opening of another courier outlet at Sovereign Centre, is expected to provide some relief to the company’s top and bottom-line. It should also benefit from new business initiatives such as the investment in its Drax Hall Business Centre (Phase 1) development, which is now fully tenanted, and the expected completion of Phase 2 in the first quarter of the upcoming financial year.
• A vaccine-led recovery in key source markets and the rollout of the local inoculation program augurs well for international travel and a rebound in local economic activity. These factors will be key determinants of the company’s rebound prospects.
• Following the 36.2% decline in the company’s stock price in 2020, it has declined by a further 5.9% since the start of 2021 and currently trades at a P/B of 4.5x which is in line with the Junior Market average.

(Source: Knutsford Express Financials & NCBCM Research)

• The nine-month period ending February 2021 was a challenging period for Paramount as the company continued to battle the negative impact of the COVID-19 pandemic on its operations. Net profit declined by 43.1% (or $21.04Mn) to $27.74Mn as the general falloff in the transportation sector weighed down its lubricants division. At the same time, its food division suffered from the closure of educational institutions and the lockdown of the entertainment industry.
• Revenues contracted by 11.6% (or $133.87Mn)  to $1.02Bn, and other operating income fell by 52.6% (or $20.84Mn).
• This substantial falloff in income was largely softened by the company’s cost rationalization program, which saw a 14.3% (or $115.52Mn) and 7.7% (or $22.99Mn) reduction in direct and indirect expenses, respectively.
• Paramount’s revenues will continue to be adversely impacted in the short term by the re-tightened restrictions. However, it should gradually improve as restrictions are lifted allowing for the re-opening of schools and a rebound in economic activity and the entertainment sector.  
• Paramount’s stock price has declined by 3.4% year to date following a 35.3% falloff in 2020. The stock currently trades at a P/E of 70.0x earnings, well above the Junior Market Distribution average of 27.4x.

(Source: Paramount Trading Financials & NCBCM Research)

• Ecuador’s President-elect Guillermo Lasso plans to introduce tax reforms as soon as he takes office next month. The reforms would be aimed at encouraging commerce and boosting government revenue with an eye on balancing the budget by the end of his term.
• The 65-year-old career banker, who with Sunday’s election victory, will become the first fiscal conservative to govern Ecuador in close to two decades, wants to cut taxes rather than increase them. Lasso is banking on the combination of lower tax rates and stepped-up collection that deters tax evasion to balance the budget.
• The president-elect’s plans run counter to suggestions from the International Monetary Fund, which has yet to distribute $2.5 billion of a $6.5 billion funding agreement signed last year, that Ecuador raises its 12% value-added tax, one of the lowest in the region.
• Instead, Lasso wants the new tax system to allow a cut in VAT during four annual holidays to stimulate retail and tourism. His plan aims to end a 2% tax on sales for small companies -- on the premise that taxes should be paid on profits rather than sales -- and to phase out a 5% currency export tax that’s undermined foreign direct investment.
• Lasso will need to build bridges with other political parties to advance his agenda and making decisions contrary to IMF suggestions could impact the government’s ability to attract more funding from the institution to support economic and fiscal recovery.

(Source: Bloomberg & NCBCM Research)

• Retiring Cuban Communist Party leader Raul Castro promised a decade ago he would transform the Soviet-style command economy into a more mixed and market-driven one “without haste and without pause.”
• Now, with the Caribbean country in crisis and even the most basic goods in short supply, the party is under pressure to act faster as it convenes this weekend for its eighth congress since the 1959 Revolution.
• The April 16-19 congress comes as Cubans battle worsening shortages of basic goods, including food and medicine. An economic crisis has been exacerbated by a tightening of decades-old U.S. sanctions and the coronavirus pandemic.
• A long-time European investor in Cuba agreed, saying the government needed to push ahead with reforms to improve competitiveness, including the further devaluation of the peso currency, liberalization of agriculture, and greater incorporation of small- and medium-sized companies into the economy.

(Source: Reuters)

• Eurozone countries should provide an additional fiscal stimulus of 3% of GDP in 2021-2022 to boost economic growth by 2% of GDP by the end of next year and reduce the negative effects of the pandemic, the International Monetary Fund said.
• In its regional outlook for the eurozone, the IMF said the extra fiscal boost could then be followed by stronger consolidation once excess capacity has been reduced.
• "Such additional support to the tune of 3% of GDP over 2021−22 could lift output by about 2% by the end of 2022 and more than half the medium-term scarring due to robust supply-side effects," the IMF said in the report.
• "This would have greater benefits for households with low incomes and fewer side effects than additional monetary stimulus. It would also bring inflation closer to target in many countries and help rebuild monetary policy space," it said.
• Eurozone countries provided more than 3 trillion euros in national fiscal stimulus and liquidity schemes last year to keep their economies going and some, like Italy, are announcing new support measures as the third wave of the pandemic triggers new lockdowns across the bloc.

(Source: Reuters)