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Fed's Rosengren says U.S. economy should see significant rebound this year Published: 13 April 2021

  • The U.S. economy could see a significant rebound this year thanks to accommodative monetary and fiscal policy, but the labor market still has much room for improvement, Boston Federal Reserve Bank President Eric Rosengren said on Monday.
  • "With labor-market slack still significant, and inflation still below the Federal Reserve’s 2 percent target, my perspective is that the current highly accommodative stance of monetary policy is appropriate," Rosengren said during a virtual discussion with business leaders.
  • Coronavirus vaccines' ability to successfully prevent the spread of new variants of the virus would also be important, he said. "Assuming virus variants do not become especially problematic, we should see an unusually strong post-recession recovery," he said.
  • Under a new framework adopted last year, Fed officials will be patient and leave rates near zero until inflation materializes - no longer raising rates in anticipation of higher inflation when the unemployment rate is low, Rosengren said.

(Source: Reuters)

Bank of England’s Tenreyro says removing policy support too early could be costly Published: 13 April 2021

  • Bank of England interest rate-setter Silvana Tenreyro said removing fiscal or monetary policy support for the economy too early after last year's coronavirus slump could have a damaging effect on the labor market.
  • "One lesson that we learned from the financial crisis is that withdrawing policy support too early can be very costly," Tenreyro said in an online discussion hosted by Swedish think tank SNS. "Withdrawing it too early ... can lead to scarring effects on the labor market that would be very costly and slow down growth going forward," she added.
  • The BoE last year cut rates to a record low of 0.1% and doubled the size of its bond-buying program to 895 billion pounds ($1.23 trillion). Tenreyro argued in late 2020 that the economy might benefit from cutting rates below zero.
  • Since then, Britain has made fast progress with its COVID-19 vaccination program, raising the prospect of a bounce-back for the economy this year and in 2022.

(Source: Reuters)

BOJ Prepares for Central Bank Digital Currency Published: 24 March 2021

  • After quietly exploring the viability of a central bank digital currency (CBDC) for some time, the Bank of Jamaica (BOJ) took the decision in May 2020, as a part of its ongoing retail payments reform, to venture into this digital innovation that is fast becoming a feature of global central banks.
  • CBDC is a digital form of central bank issued currency and is therefore legal tender. It is not to be confused with cryptocurrency, which is privately issued and not backed by a central authority. CBDC is fully backed by the Central Bank, the sole issuer.
  • The issuance and distribution of the CBDC will be fully integrated with the Bank’s financial market infrastructure, the JamClear® Real Time Gross Settlement System (RTGS). The approach will not compete with deposits in deposit taking institutions, but rather it will leverage the existing financial and telecommunications infrastructures of the country.
  • Individual consumers and businesses will benefit from the sheer convenience, from a broadened and more modern payment system, of a digital alternative to cash that is seamless, secure, and simple to use. They will also benefit from greater financial inclusion, as persons who do not currently have regular bank accounts will be able to access CBDC accounts in a way that will be easier and simpler than accessing regular bank accounts.
  • The financial system will benefit from increases in systemic efficiency and significant reductions in costs for cash distribution and storage. It will also allow for an increase in the menu items of services available to customers and create an opportunity to innovate unique products and systems complementary to CBDC use.

(Source: JIS)

SALF Increase Share Capital and 10:1 Stock Split Unanimously Passed at Annual General Meeting Published: 24 March 2021

  • Salada Foods Jamaica Limited (SALF) has advised that at its recent Annual General Meeting shareholders voted unanimously on the following Special Business Resolutions to increase the Company’s authorized share capital and a ten to one stock split.
  • With this resolution, the maximum number of shares that the Company is entitled to issue be and is hereby increased from 500,000,000 shares of no par value to an unlimited number of ordinary shares, such shares to rank pari passu with the existing shares in issue.
  • Each of the issued ordinary shares in the capital of the Company will be subdivided into 10 ordinary shares with effect from the close of business on Wednesday, March 31, 2021, resulting in the total issued capital of the Company being increased from 103,883,290 ordinary shares of no par value to 1,038,832,900 ordinary shares of no par value.
  • This is the first stock split for the company since the last one in November 2008, and the hope is to boost the liquidity of the stock as approximately 90% of the small float is held by the top 10 shareholders.

(Source: JSE)

IDB Studies Capital Increase Published: 24 March 2021

  • The Inter-American Development Bank (IDB) said Sunday that its board authorized studies to consider a capital increase as part of a multi-pronged program to resume economic growth in Latin America and the Caribbean.
  • According to the President of IDB, Mauricio Claver-Carone, the IDB arranged almost $24.00Bn in financing to diminish the impact of the COVID-19 pandemic in 2020 and it has earmarked $1.00Bn to buy and distribute vaccines in the region. 
  • The Washington DC-based development bank has also identified five areas for investment in a new program called "Vision 2025, Reinvest in the Americas," including regional integration and strengthening value chains, support for small and medium-sized businesses to narrow a $1.00Tn financing gap, promoting the digital economy and prioritizing investments for gender equality and climate change responses.
  • The development bank also committed $1.25Bn in financing for economic recovery plans in Colombia and added $500.00Mn to the Korea Infrastructure Development Co-financing Facility for Latin America and the Caribbean (KIF) with the South Korean government. This will be helpful in improving economic recovery prospects and governments’ fiscal performance.

(Source: Latin Finance)

Energy Prices, Pandemic Recovery Will Drive Trinidad & Tobago To Strongest Growth Since 2006 Published: 24 March 2021

  • Fitch Solutions has revised its forecast for Trinidad & Tobago’s (T&T) real GDP growth up to 5.3% in 2021, from 4.8% previously and an estimated -6.5% in 2020.
  • The agency’s revision is driven by an improving export outlook, as the global deployment of COVID-19 vaccines boosts energy prices, as well as the limited spread of the virus within T&T, which will permit the gradual normalization of economic activities.
  • However, risks to the agency’s forecast are skewed to the downside, as the country’s slow vaccination timeline leaves the country vulnerable to a surge in domestic COVID-19 cases that would slow the rebound in domestic activity, while the spread of more contagious virus strains could undermine global energy demand.

(Source: Fitch Solutions)

Japan Lowers Exports View, Says Economy Shows Weakness In March Report Published: 24 March 2021

  • Japan's government in March cut its view on exports for the first time in 10 months and said overall economic conditions were still showing weakness due to the coronavirus pandemic.
  • Authorities also urged attention to how the spread of COVID-19 is affecting the Japanese and other economies, days after the end of a state of emergency in the capital, Tokyo, and three neighboring prefectures. "The economy shows some weakness, though it continued picking up amid severe conditions due to the coronavirus," the government said in its economic report for March.
  • Among key economic elements, the government slashed its assessment of exports, a key driver of Japan's trade-reliant economy, for the first time since May, saying they were increasing at a slower pace.
  • Behind the downgrade was a slowdown in car exports, which showed signs of flattening out after manufacturers front-loaded shipments ahead of an expected recovery from the health crisis, especially in the United States, a government official said.
  • Analysts expect Japan's economy to shrink sharply in the current quarter as the emergency that ended on Sunday weighed on business activity and consumer spending.

(Source: Reuters)

Europe Facing Difficult Quarter But ECB Will Do Its Part: ECB's Lane Published: 24 March 2021

  • Europe is facing a difficult second quarter as coronavirus infections rise and governments re-impose lockdown measures, but the European Central Bank will do its part to keep borrowing costs ultra-low, ECB chief economist Philip Lane said on Tuesday.
  • Fearing that rising borrowing costs would derail the recovery, the ECB earlier this month promised to ramp up bond purchases to keep yields low. Figures published on Monday showed its buys of mostly government bonds were already up by half in the week since that decision.
  • "It's going to be a long quarter," Lane told CNBC in an interview, pointing to high and rising COVID-19 infection numbers. "It's a contest between progress and vaccinations and other medical progress versus the near-term challenge of trying to get this virus under control."
  • Vaccination campaigns have been painfully slow across the 19-country eurozone and governments are now extending, and in some cases tightening, lockdown measures well into April, pointing to a further delay in recovery.
  • Lane added that governments, which play a vital role in financing the economy, needed to reflect on the adequacy of their response, particularly in light of the U.S. government's $1.9 trillion stimulus package, which shifted the debate on the issue.

 

  • European officials are increasingly under fire for what is seen as an underwhelming fiscal response to the crisis, leaving Europe as a top laggard among advanced economies in the recovery.

(Source: Reuters

Fitch Affirms Jamaica’s B+ Rating, Outlook Stable Published: 19 March 2021

  • On March 18, 2020, Fitch Ratings affirmed Jamaica's Long-Term Foreign-Currency Issuer Default Rating (IDR) at 'B+' and maintained its stable outlook.
  • This rating is supported by World Bank Governance Indicators that are substantially stronger than the 'B' and 'BB' medians, a favorable business climate according to the World Bank Doing Business Survey, moderate inflation, and moderate commodity dependence. These strengths are balanced by vulnerability to external shocks, a high public debt level, and a debt composition that makes the sovereign vulnerable to exchange rate fluctuations.
  • The Stable Outlook is supported by Fitch’s expectation that the public debt level will return to a firm downward path post-pandemic, which is underpinned by political consensus to maintain a high primary surplus, the resilience of external finances, and stronger economic policy institutions.
  • Factors that could lead to positive rating action include a large and sustained decline in government debt/GDP ratio over the medium term; a strengthening of growth prospects without the emergence of macroeconomic or fiscal imbalances; and entrenchment of institutional improvements in the fiscal policy framework that enhances confidence in medium-term economic and fiscal performance.
  • On the other hand, an increase in debt-to-GDP, for example owing to marked depreciation of the Jamaican dollar or revenues failing to recover at expected rates; economic growth below expectations caused, for example, by the tourism industry being affected by a third wave of the pandemic; and an inability to access financing or evidence of distressed financing conditions could lead to a downgrade.

(Source: Fitch Ratings)

Revenue Growth Bolsters The LAB’s Q1 Net Profit Published: 19 March 2021

  • Strong revenue growth continues to bolster The LAB’s bottom-line resulting in a 37.0% (or $18.11Mn) increase in net profit for the 3 months ended January 31, 2021, to $67.02Mn (EPS: $0.07) relative to the same period in the 2019/20 financial year.
  • The company has remained resilient in spite of the challenges of the pandemic and benefited from a rise in its core business. Media placement which was up $21.3Mn (or 16.6%), and production which increased by $72.8Mn (or 92.3%), contributed to a 35.5% (or $93.27Mn) expansion in revenues, which translated into the higher earnings after tax. 
  • The overall effect of robust revenue growth was tempered by a 39.6% (or $68.37Mn) and 29.4% (or $11.97Mn) increase in direct and admin expenses, respectively. Higher staff costs, on account of increased work volume, repairs and maintenance of production equipment, and depreciation and amortization costs were behind the rise in admin expenses. Notably, even with this increase, administrative expenses as a percentage of revenue inched down to 14.9% from15.6% in the same period last year.
  • The LAB should continue to benefit from the gradual recovery in domestic economy and the measures being implemented by the government to improve business creation as well as MSME expansion and competitiveness, which could stimulate increased demand for its services.
  • After increasing by 1.7% to $3.06 during 2020, the company’s stock price has fallen by 5.9% since the start of 2021, closing Thursday’s trading session at $2.88. At this price, the LAB currently trades at a P/E of 16.6x earnings, which is below the Junior Market Average of 24.8x.

(Source: The Lab Financial Statements & NCBCM Research)