• A dispassionate assessment of Jamaica’s foreign exchange (FX) market at this time, in the context of a global pandemic, tells a story of both bad and good news.
• The major bad news is that as a direct result of the COVID-19 pandemic, tourism inflows, Jamaica’s biggest sources of foreign exchange earnings, remain practically at a standstill.
• BOJ’s current estimates of the value of the drastic fallout in FX inflows for the 2020/21FY in a best-case scenario is US$800Mn, and in a worst-case scenario is US$1.40Bn.
• In contrast, the good news is that in several ways, including but not limited to direct sales intervention, BOJ has, since March this year, acted decisively to implement an assortment of measures, all designed to supply extra FX liquidity to the financial system, even though the system is not short of FX liquidity.
• The health of the financial system, the robust level of remittance inflows, the vigorous volumes present in the market, and the strength of BOJ’s foreign reserves, all combine to indicate clearly that the economy at this time has more than enough FX at its disposal to safely navigate the rough waters of this crisis.

(Source: BOJ)

• Mexico’s current account will swing into surplus in 2020 for the first time in decades, as exports outpace imports and remittances continue to surprise to the upside.
• Fitch Solutions forecasts Mexico’s current account surplus will stand at 0.8% of GDP in 2020, up from -0.3% in 2019, before returning to a deficit of -1.3% in 2021 as import demand recovers.
• There are a number of risks to Mexico’s external account stability, particularly if re-openings in the global economy are reversed or if uncertainty over Mexico’s outlook drives capital outflows.

(Source: Fitch Solutions)

• Fitch Solutions expects Brazil's current account deficit will widen heading into 2021, as rebounding economic activity drives a sharp rise in imports.
• The agency forecasts a current account deficit of 1.0% of GDP in 2020 and 1.9% in 2021, which is narrow relative to the average 2.5% deficit of 2018-19.
• Capital inflows will most likely pick up as risk appetite returns to global markets, which should cover Brazil's external financing needs.

(Source: Fitch Solutions)

• Oil rose as data showed China’s economic recovery from the coronavirus crisis is gathering strength, offsetting a bleak assessment of demand by another top energy organization. Futures gained 1.2% with below-average trading volumes in New York.
• Chinese retail sales rose for the first time this year in August while industrial production expanded by a higher-than-expected 5.6%. The data drove European equities and U.S. stock futures higher.
• The International Energy Agency was the latest bearish voice on oil demand, following pessimistic calls this week from BP Plc (British Petroleum), Trafigura Group, and the OPEC cartel. The market outlook has grown “even more fragile” with a resurgence of the pandemic, the IEA said Tuesday.

(Source: Bloomberg)

• U.S import prices increased more than expected in August and gains in the prior month were revised sharply higher, supporting views that inflation pressures were building up.
• The Labour Department said on Tuesday import prices rose 0.9% last month. Data for July was revised higher to show import prices accelerating 1.2% instead of 0.7% as previously reported.
• Economists polled by Reuters had forecast import prices, which exclude tariffs, increasing 0.5% in August. In the 12 months through August, import prices fell 1.4% after declining by 2.8% in July.

(Source: Reuters)

• The Planning Institute of Jamaica (PIOJ) is reporting that the economy contracted by an estimated 18% for the April to June quarter, relative to the corresponding period last year.
• Specifically, a 7% and 20.6% contraction in the goods-producing industry and services industry, respectively, contributed to the over falloff in economic activity.
• The outturn was largely due to the impact of the coronavirus and measures implemented to contain its spread, which has resulted in job losses and reduced work hours, lower-income, weakened consumer demand, and continued slowdown in construction-related activities.
• All goods-producing subsectors declined, with mining and quarrying recording the greatest reduction of an estimated 25.2% due to lower alumina production outweighing increased bauxite output. The closure of the JISCO Alpart refinery has resulted in lower capacity utilization within the mining and quarrying industry. In addition, the agriculture sector declined by 8.5%; manufacturing by 2.9%; and construction by 3%.
• As it relates to the services industry, four of the five subsectors declined, with hotels and restaurants falling by 87.5%.

(Source: PIOJ)

• Colombia’s Banco de la República (BanRep) will maintain its dovish monetary policy stance in the coming quarters in an effort to promote economic activity during the Covid-19 pandemic.
• In addition to weak price pressures that keep inflation at multi-year lows, a dovish US Federal Reserve will support BanRep's sustained monetary stimulus measures.
• Fitch Solutions forecasts that BanRep will leave its policy interest rate at 2.00% through the end-2020 and into 2021. That said, Fitch revised its 2020 and 2021 average inflation forecasts to 2.6% and 2.5% y-o-y, from 2.9% and 3.0% previously, as subdued domestic demand persists in the short-to-medium term

(Source: Fitch Solutions)

• The outlook for Venezuela’s banking sector remains bleak, as numerous structural headwinds and the impact of Covid-19 will keep the sector effectively unable to function.
• At end-2020, Fitch Solutions expects total asset growth of 1,993.7% y-o-y to VES5,887.95Mn, led by bond purchases, reflecting high inflation amid increases in government spending.
• Should a new government come into power, it is expected that the sector’s outlook would improve dramatically, though nominal growth in banking indicators would slow as inflation is reined in.

(Source: Fitch Solutions)

• The Organization for Economic Cooperation and Development has warned the interruption to children’s schooling in the wake of the coronavirus pandemic could mean global economic growth is 1.5% lower on average for the rest of the century.
• The intergovernmental economic organization said this projected loss of gross domestic product, which measures economic growth, would be equivalent to a total economic loss of $15.3Tn in the U.S.
• The OECD paper, published Tuesday and citing third-party data, estimated how students’ losing out on one-third of the school year would impact the global economy in the long-run.
• It was estimated this loss of time in the classroom would lead to a loss of skills, and this, in turn, would negatively impact productivity. As a result, the total cost of missed schooling could amount to 69% of the current GDP for the typical country, the OECD said.
• The OECD said losses to economic growth could be “proportionately higher” if schools were slow to recover.

(Source: CNCB News)

• Market watchers believe the European Central Bank (ECB) could fine-tune its policies this week, and may even follow the Federal Reserve by revising its inflation targets in the longer term.
• The ECB’s Governing Council convenes on Wednesday and Thursday to discuss its monetary policy stance and its assessment of the eurozone economy. Since its last meeting, economic data has shown signs of a slowing of the recovery, the euro has appreciated and core inflation slumped to a new record low in August.
• While the majority of analysts do not expect much policy action and think the ECB will wait until December, there is a remote chance of tweaks to its guidance this week, backed by new staff projections.

(Source: CNBC News)