A sell-off in global financial markets, spurred by concerns over the economic impact of Covid-19 (coronavirus), will continue to batter Latin American assets over the coming weeks as investors’ risk appetites weaken.
Fitch sees rising risks that the sell-off in Latin American currencies leading to a spike in inflation, potentially prompting central banks across the region to tighten monetary policy despite slowing growth.
There is also additional downside risk should the virus continue to spread, particularly given reports of the first confirmed cases of Covid-19 in Latin America.
Fitch Ratings has affirmed the Caribbean Development Bank's (CDB) Long-Term Issuer Default Rating (IDR) at 'AA+' with a Stable Outlook.
CDB's 'AA+' Long-Term IDR reflects the bank's intrinsic credit profile, underpinned by liquidity and solvency assessments of 'aaa' and 'aa+', respectively. The Stable Outlook reflects Fitch's view that the bank will maintain excellent capitalization levels and liquidity buffers over the current strategic period (2020-2024).
Developments that could, individually or collectively, trigger positive rating action are: A material improvement in concentration risk or asset quality metrics, potentially driven by greater exposure to higher rated borrowers.
Conversely, developments that, individually or collectively, could trigger negative rating action are: Increased concentration risk as evidenced by greater exposure to the bank's largest borrowers, including Barbados. A breach of PCS on its sovereign exposures or an increase in the bank's risk profile driven by higher non-sovereign exposures. Deterioration of the bank's business environment as a result of significant credit quality deterioration in the bank's countries of operations.
OPEC has agreed to impose a deeper round of production cuts in order to support oil prices, paving the way for crunch talks with non-OPEC leader Russia, who still has to agree to the plan.
The 14-member group, led by Saudi Arabia, decided on Thursday to cut production by 1.5 million barrels per day (bpd) through the second quarter of the year to alleviate downward pressure on oil prices.
International benchmark Brent crude traded at $51.33 Thursday morning, up around 0.4%, while U.S. West Texas Intermediate (WTI) stood at $47.11, around 0.7% higher.
The IMF is making available about $50 billion through its rapid-disbursing emergency financing facilities or low income and emerging market countries that could potentially seek support. Of this, $10 billion is available at zero interest for the poorest members through the Rapid Credit Facility.
There is also the Catastrophe Containment and Relief Trust – the CCRT – which provides eligible countries with up-front grants for relief on IMF debt service falling due.
The CCRT proved to be effective during the 2014 Ebola outbreak, but is now underfunded with just over $200 million available against possible needs of over $1 billion. Member countries were called on to ensure that this facility is fully re-charged and ready for the current crisis.
Profit at Caribbean Cement Company declined 23.6% for the year ended December 31, 2019, moving to $1.88Bn (EPS: $2.21) at the end of 2019, down from $2.47Bn (EPS:2.90) in 2018.
The decline in profit was primarily as a result of a 201.0% ($427.60Mn) increase in losses on foreign exchange. Additionally, operating expenses increased 12.7% (or $280.70Mn), while financial expenses grew 32.6% (or $216.96Mn).
The stock has fallen 22.0% YTD and closed Tuesday’s trading session at $65.04. At this price, the stock currently trades at a P/E of 29.4x which is above the Main Market Industrial and Material sector average of 23.0x.
The Planning Institute of Jamaica (PIOJ) is reporting gains under the country’s long-term National Development Plan – Vision 2030 Jamaica. Director General, Dr. Wayne Henry, made the disclosure while reporting on the 2018 targets during the PIOJ’s recent quarterly briefing at the Institute’s head office in New Kingston.
Henry said with respect to Goal 3 – ‘Jamaica’s Economy is Prosperous’ – much of the development gains were attributed to macroeconomic improvements.
He noted that tourism and agriculture also showed progress, pointing out that the former met the majority of the 2018 targets.
The Director General said notable progress was also made in the business environment, “as the 2018 target for [reducing the] employment rate was surpassed”.
Additionally, he said the 2019 out-turn “continues this trend, with the second consecutive year of record-low unemployment rates”.
The Banco Central de la República Dominicana (BCRD) will implement one 25 basis point cut in 2020 to 4.25%, as low inflation and a more dovish US Federal Reserve support expansionary monetary policy.
Fitch has revised up the 2020 inflation forecast from 3.1% to 3.5% in 2020, amid increasing food prices, but believe lower energy prices will keep levels of Dominican inflation contained.
Risks are weighted heavily to the downside, as the outbreak of the Covid-19 (coronavirus) could strain domestic growth and put increasing pressure on the central bank to adopt additional easing.
Fitch Solutions will maintain their view that the Central Bank of Trinidad and Tobago (CBTT) will hold its monetary policy rate at 5.00% through end-2020 amid low inflation and weak economic growth.
Declining food prices will keep low inflation anchored, and a narrowing interest rate differential with the US will reduce pressure on the CBTT to increase rates.
Risks to the end-2020 interest rate forecast are weighted to the downside as the sustained spread of the Covid-19 (coronavirus) could spur monetary easing.
The Federal Reserve slashed interest rates by half a percentage point on Tuesday, a bold attempt to give the US economy a jolt in the face of concerns about the coronavirus outbreak.
It was the first unscheduled, emergency rate cut since 2008, and it also marks the biggest one-time cut since then. The new benchmark interest rate is a range of between 1% and 1.25%.
Although the fundamentals of the US economy remain strong, "the coronavirus poses evolving risks to economic activity," the central bank said in a statement.
The emergency rate cut came as somewhat of a surprise: Although the stock market soared Monday in expectation of a rate cut (the market predicted a 100% chance of a cut in March), the Fed and other central banks had seemingly pooh-poohed the notion as recently as Tuesday morning.
Although a rate cut won't cure infections or fix broken supply chains, "it will help boost household and business confidence," Powell noted.
As COVID-19 reaches more than 60 countries, the World Bank Group is making available an initial package of up to $12 billion in immediate support to assist countries coping with the health and economic impacts of the global outbreak.
Through this new fast track package, the World Bank Group will help developing countries strengthen health systems, including better access to health services to safeguard people from the epidemic, strengthen disease surveillance, bolster public health interventions, and work with the private sector to reduce the impact on economies.
The COVID-19 support package will make available initial crisis resources of up to $12 billion in financing — $8 billion of which is new — on a fast track basis. This comprises up to $2.7 billion new financing from the International Bank for Reconstruction and Development (IBRD); $1.3 billion from the International Development Association (IDA), complemented by re-prioritization of $2 billion of the Bank’s existing portfolio; and $6 billion from the International Finance Corporation (IFC), including $2 billion from existing trade facilities. It will also include policy advice and technical assistance drawing on global expertise and country-level knowledge.
