The Executive Board of the International Monetary Fund (IMF) approved an emergency request for the disbursement of $ 515 million to Panama to help the country meet its urgent balance of payments needs stemming from the fight against the COVID-19 pandemic.
This was announced this Thursday by the institution in a statement in which it explained that the approval of the loan to Panama was carried out through the Rapid Financing window (IFR).
The IMF affirmed that Panama has been forced to request this emergency financial assistance since the virus, which until Wednesday had caused 3,751 infections and 103 deaths in the country, has hit the Panamanian economy and caused an increase in the budget deficit.
Mexican Finance Minister Arturo Herrera said on Thursday that he is “very concerned” about the country’s ratings downgrade but added that the decision is understandable under the current circumstances.
Fitch Ratings on Wednesday downgraded Mexico’s sovereign rating to one notch above speculative grade, or “junk”, on fears that the economic shock caused by the novel coronavirus will cause a “severe recession” this year.
Mexico’s economy had already tipped into recession in 2019 and the coronavirus, which causes a respiratory illness called COVID-19, has stoked fears of an even sharper downturn this year.
China reported that its first quarter GDP contracted by 6.8% in 2020 from a year ago as the world’s second largest economy took a huge hit from the coronavirus outbreak, data from the National Bureau of Statistics of China showed.
Analysts polled by Reuters had predicted China’s GDP would shrink by 6.5% in the January to March quarter, compared to a year ago. The forecasts from 57 analysts polled ranged from a 28.9% contraction to a 4% expansion. China’s economy grew 6% in the previous quarter, from September to December 2019.
The country is facing tremendous pressure amid increasing uncertainties and instabilities from the coronavirus outbreak, said the statistics bureau. The country is also facing new difficulties and challenges in resuming work and production.
Oil prices rose on Friday with Brent gaining nearly 3% after President Donald Trump laid out guidelines on reviving a U.S. economy ravaged by the coronavirus pandemic that has punched a huge hole in global demand for crude and refined products.
Brent was up by 75 cents, or 2.7%, at $28.57 a barrel by 0058 GMT, while U.S. crude CLc1 for May delivery, which expires on April 21, was up 1 cent, or 0.1%, at $19.88 a barrel. The more active June contract was up $1.1, or 4.3%, at $26.63.
Trump laid out a three-stage process for ending lockdowns to stop the spread of the coronavirus that has now killed more than 32,000 Americans and nearly 140,000 worldwide, while some other countries were also relaxing restrictions.
The All Jamaica Consumer Price Index recorded a negative movement of 0.3% for March 2020.The main contributor to this movement in March was the 1.8% reduction in the index for the ‘Housing, Water, and Electricity, Gas and Other Fuels’ division. This movement was due to lower rates for electricity which resulted in a 3.7% fall in the group ‘Electricity, Gas and Other Fuels’.
However, higher water rates tempered the downward movement of the index for the division as reported in the 1.7% increase in the group ‘Water Supply and Miscellaneous Services Related to the Dwelling’.
The heaviest weighted division ‘Food and Non-Alcoholic Beverages’ also recorded a decline in its index, falling 0.2%. The overall rate of inflation was however moderated by a 0.5% increase in the index for the ‘Transport’ division, due mostly to higher petrol prices.
For the review period, the point-to-point inflation was 4.8%, the fiscal year-to-date was 4.8% and the calendar year-to-date inflation rate was -0.7%.
State Minister for Industry, Commerce, Agriculture and Fisheries, Hon. Floyd Green, says the 50 per cent cut in export-related fees and charges will enable more businesses to tap into the export market and boost Jamaica’s competitiveness internationally.
“With the 50 per cent reduction in those fees, a number of our companies will now be in a better position to export,” Mr. Green told JIS News.
Green pointed out the Government is committed to removing barriers in order to ensure that more local companies can sell goods abroad.
The Panamanian economy will likely contract in the coming quarters due to increasing government restrictions to combat the spread of the Covid-19 outbreak and slumping global trade flows through the Panama Canal.
Panama’s fiscal deficit will widen in the coming quarters as stimulus measures designed to mitigate the economic impact of the Covid-19 pandemic and subdued revenues weigh on the fiscal balance.
The ongoing push for constitutional reform in Panama will underpin political uncertainty in the country, as the process may split President Laurentino ‘Nito’ Cortizo from his Partido Revolucionario Democrático (PRD) or spark public protests.
Panama will continue to run wide current account deficits as its negative goods trade balance exceeds its services trade surplus.
The economic shock represented by the coronavirus pandemic will lead to a severe recession in Mexico in 2020. A recovery starting in 2H20 will likely be held back by the same factors that have hampered recent economic performance, which has lagged rating and income level peers.
Even in the absence of a debt-financed fiscal response to the economic recession, general government debt/GDP is likely to jump by at least 6pp of GDP to almost 50%, the highest since the 1980s.
The credible monetary policy framework built around a flexible exchange rate and inflation targeting remains a rating strength and will help the economy absorb the external shock, while minimizing current account external imbalances.
The extent of the economic contraction and scope for recovery starting 2H20 will be dictated by prospects in the U.S., Mexico's main trading partner, as well as the duration of the virus shock domestically.
The International Monetary Fund (IMF) announced on Wednesday that its executive board had approved creation of a new short-term liquidity line to help member countries with strong fundamentals deal with the new coronavirus pandemic.
IMF Managing Director Kristalina Georgieva said the facility would provide a revolving and renewable backstop for member countries with very strong policies and fundamentals, who needed short-term and moderate support with their balance of payments.
She said the instrument would allow the Fund to provide revolving access of up to 145 percent of a country’s quota, filling “a critical gap in the Fund’s toolkit.”
Oil prices were broadly stable on Thursday after sharp losses in the previous session, with investors hoping that a big build-up in U.S. inventories may mean producers have little option but to deepen output cuts as the coronavirus pandemic ravages demand.
With official data showing U.S. inventories surging the most on record, U.S. West Texas Intermediate fell on Wednesday to its lowest since February 2002, with Brent losing more than 6%.
Brent crude gained 86 cents, or 3.1%, to trade at $28.57 per barrel. WTI was up 26 cents, or 1.3%, at $20.12 per barrel.
