• Following the 1.6% y-o-y contraction in Q121, Costa Rican real GDP is expected to return to growth from Q221 onwards as private consumption and investment levels recover following the COVID-19 pandemic. 
• Fitch Solutions forecasts growth of 3.2% in 2021 and 3.3% in 2022, implying that GDP will not regain the pre-pandemic level of output until 2022 following the 4.5% contraction in 2020. 
• Last year, the economy posted its first annual contraction since 2009 as the coronavirus pandemic depressed private consumption, investment and exports. 
• In addition, the government’s limited ability to spend in 2020 capped its fiscal stimulus package, contrasting with many other Latin American governments that enacted countercyclical measures to blunt the economic impact of the pandemic.  
• In the longer term, austerity measures tied to the government’s January 2021 IMF deal will likely constrain public consumption and growth. In January the IMF mission and the Costa Rican government reached a staff-level agreement on a three-year program to anchor the government’s policy and reform efforts, aimed at bolstering the country’s response to the pandemic and at laying the foundation for a strong and durable economic recovery. The arrangement is under the Extended Fund Facility (EFF) for about US$1.75 billion.

(Source: Fitch Solutions & IMF)

• Honduras will see robust real GDP growth in the quarters ahead as rebounding employment and strong remittance inflows power private consumption. 
• Its 2021 real GDP growth forecast was revised up to 5.0%, from 4.2% previously, and its 2022 forecast to 3.5%, from 2.9%, as economic prints in H121 constituently surprised to the upside. 
• The economic impact of the COVID-19 pandemic and the November 2020 landfalls of hurricanes Eta and Iota drove Honduras’ largest annual recession on record. While Fitch Solutions had previously expected both factors to continue limiting activity through H121, economic prints in the year through July have surprised to the upside. 
• In Q121, seasonally adjusted real GDP growth reached 6.2% q-o-q despite continued public health restrictions, suggesting that the country’s economy has become better adapted to pandemic-related disruptions. 
• However, Fitch sees significant downside risks to economic activity stemming from political instability surrounding the November 2021 presidential election.

(Source: Fitch Solutions)

• Euro zone businesses expanded activity at the fastest rate in 15 years in June as the easing of more coronavirus restrictions brought life back to the bloc's dominant service industry, a survey showed on Monday. But that surge in growth has come at a cost as inflationary pressures mounted due to labour shortages and disruptions to supply chains caused by the pandemic. 
• IHS Markit's final composite Purchasing Managers' Index (PMI), seen as a good gauge of economic health, jumped to 59.5 last month from May's 57.1, its highest level since June 2006. That was ahead of the 59.2 "flash" estimate and well above the 50 mark separating growth from contraction. 
• "The index was at its 15-year high, confirming that the recovery in the bloc's economy is well underway. At the same time, backlogs and producer price pressures show no signs of abating," said Mateusz Urban at Oxford Economics. 
• An acceleration in vaccination programmes on the continent has meant governments have allowed more of the services industry to re-open and the sector's PMI soared to its highest reading since July 2007. Activity in Germany's service industry grew in June at its fastest pace since March 2011 while in France the sector boomed following the easing of COVID-19 restrictions.

(Source: Reuters)

• Oil prices rose on Monday, driven higher after OPEC+ nations called off talks on output levels, meaning no deal to boost production has been agreed. Brent was up 94 cents, or 1.2%, at $77.11 a barrel, trading around 2-1/2 year highs. U.S. oil gained $1.11, or 1.5%, to $76.27 a barrel. 
• OPEC+ ministers abandoned the talks and set no new date to resume them, after clashing last week when the United Arab Emirates rebuffed a proposed eight-month extension to output curbs. The Organization of the Petroleum Exporting Countries and its allies, a group known as OPEC+, agreed on record output cuts in 2020 to cope with a COVID-induced price crash. 
• The producers have been gradually easing the output restrictions, but a plan on Friday to lift output by about 2 million barrels per day (bpd) from August to December 2021 and to extend the pact on a series of gradual output shifts to the end of 2022 was blocked by the UAE. 
• The prospect of OPEC+ not adding the extra barrels to the market next month boosted prices, but also added volatility, said Rystad Energy oil markets analyst Louise Dickson, noting that prices briefly turned negative.

(Source: Reuters)

• The shipment of 65,000 doses of AstraZeneca vaccines, donated by the Government of Mexico, will facilitate the staging of another blitz this weekend to inoculate persons who are due their second dose. 
• Health and Wellness Minister, Dr. the Hon Christopher Tufton, made the disclosure at a press conference held at the Norman Manley International Airport in Kingston on Wednesday (June 30), shortly after witnessing the arrival of the shipment. 
• “This weekend’s blitz, from Friday to Sunday, possibly Monday, will only be for persons who fall in that eight-week or over period, because we need to clear that backlog,” he said. 
• Tufton noted that about 257,000 doses of vaccine have been administered, to date, with some 173,000 persons getting their first dose and 84,000 receiving second doses.  He said some 25,000 to 30,000 persons are now due their second dose. 
• Executive Director, Mexican Agency for International Cooperation and Development (AMEXCID), Dr. Laura Elena Carrillo Cubillas, said the donation is a token of her country’s appreciation and respect for the Jamaican people. 
• “Mexico has long historical ties across the Caribbean Sea especially, with your country. That’s why we recently celebrated more than half a century of diplomatic relations that have brought our people closer, facilitating a better understanding of a rich cultural and artistic heritage, while allowing us to cooperate on important regional and international initiatives,” she said.

(Source: JIS)

• The IMF Executive Board approved the request by St. Vincent and the Grenadines for emergency financing assistance of about US$11.6Mn under the Large Natural Disaster Window (LNDW) of the Rapid Credit Facility (RCF). The RCF will help address the urgent balance of payment needs associated with the explosive eruption of the La Soufrière volcano. 
• The ongoing eruption is hitting St. Vincent and the Grenadines hard, compounding the economic and social/humanitarian impact of the pandemic and by IMF staff’s estimates, may result in economic losses amounting to around 30% of GDP as infrastructure, housing, and crops are damaged. 
• This will be the first request under the LNDW of the RCF. A member may qualify for the LNDW when urgent balance of payments needs stem from a natural disaster that results in damages of at least 20% of the member’s GDP.

(Source: IMF)

• Venezuela is preparing to once again lop off zeroes from the national currency in an attempt to simplify daily transactions which sometimes barely fit on a calculator or require swiping cards multiple times to complete a purchase. 
• The central bank is planning to slash six zeroes from the bolivar as early as August after previous attempts to issue larger-denomination bills failed to resolve problems created by endemic inflation, according to three people with direct knowledge of the matter who aren’t authorized to speak publicly about the plans. That means one dollar would fetch 3.2 bolivars instead of 3,219,000 at present. 
• Venezuela last carried out a “redenomination” of the bolivar in 2018 and in March began printing a 1 million-bolivar note, the largest in the country’s history. But that bill is now worth just $0.32 and isn’t enough to buy a cup of coffee. Since 2008, the government -- first under the late Hugo Chavez, and then under current President Nicolas Maduro -- has removed 8 zeroes from the currency, as hyperinflation decimated people’s savings. 
• While the country has now informally adopted the U.S. dollar for many every day transactions, most Venezuelans only earn bolivars and the local currency is needed for things like bus fare, parking and tips. 
• The push for simplifying bolivar transactions has come largely from companies who have raised the issue with the government. Things like paying taxes and dealing with other accounting calculations have become absurdly complex.

(Source: Bloomberg)

• The International Monetary Fund raised its 2021 U.S. growth projection sharply to 7.0% due to a strong recovery from the COVID-19 pandemic and an assumption that much of President Joe Biden's infrastructure and social spending plans will be enacted. 
• The IMF's latest forecast, marking the fastest U.S. growth pace since 1984, compares favourably to an April projection of 4.6% growth in 2021. The Fund raised its 2022 U.S. GDP growth forecast to 4.9%, up from its previous 3.5% forecast made in April. 
• The new forecasts consider the IMF's annual assessment of U.S. economic policies. The forecasts also assume that the U.S. Congress will pass the Biden administration's American Jobs Plan and American Families Plan for infrastructure, social spending and tax reform plans this year at a size and composition similar to their original proposals. 
• IMF Managing Director Kristalina Georgieva said the two packages would implement many recommendations that the IMF has made for the United State for years, including investments to boost productivity, education and to allow more women to join the American workforce.

(Source: Reuters)

• "The European Central Bank should not start tolerating higher inflation under its new policy framework, as that could be taken as a sign that it is trying to bankroll indebted governments”, ECB policymaker Jens Weidmann said on Thursday. 
• ECB policymakers are in the middle of debating a new strategy, with many now backing the notion of letting inflation surpass 2% for a while after it has lagged below that level for most of the past decade. 
• But Weidmann, who heads Germany's Bundesbank and has long warned that the ECB's massive purchases of government bonds risked blurring the lines between monetary and fiscal policy, rejected that approach. 
• "Holding still when the inflation rate exceeds (the ECB's) target level in the medium term could be misunderstood...as an attempt by monetary policy to put the sustainability of public finances above the goal of price stability," he said in a speech. "This could make it even more difficult to anchor inflation expectations". 
• He also reaffirmed his opposition to targeting an average inflation rate, as the U.S. Federal Reserve is doing, saying it would be difficult to communicate and painful to implement. Instead, Weidmann said the ECB should set its inflation goal at 2% and see it symmetrically, meaning any overshoot would be taken just as seriously as an undershoot.

(Source: Reuters)

• Bank of Jamaica (BOJ) announced its decision to hold the policy interest rate unchanged at 0.50% per annum on June 30, 2021. The policy rate is the interest rate that it offers to deposit-taking institutions on overnight placements with BOJ. 
• The decision to hold the policy rate unchanged was made by a unanimous vote by the Bank’s Monetary Policy Committee (MPC). This decision was based on the MPC’s assessment that, despite recent increases in international commodity prices, the existing stance of monetary policy remains appropriate to support inflation within the target range (4%-6%) over the next two years. The Bank’s accommodative monetary policy posture is also aimed at supporting a recovery in economic activity in Jamaica. 
• Based on the Bank’s forecast in May 2021, inflation is projected to average 4.8% over the next two years. The forecast anticipates that commodity price inflation will accelerate in the context of global supply chain disruptions and increasing demand as economies reopen, leading to higher domestic transport and processed food inflation.

(Source: BOJ)