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Tourism Will See An Uneven Recovery Published: 22 December 2021

  • The tourism sector, one of the industries that suffered most during the pandemic, will be an increasing driver of economic recovery in 2022. 
  • However, Fitch believes that the recovery will be uneven, particularly for economies that depend heavily on tourism. It is expected that most Western consumers’ willingness to travel will rise in 2022 as household balance sheets remain strong and as restrictions continue to ease. 
  • But Fitch also expects that demand will be focused on short-haul destinations. This will benefit markets in the Caribbean and Southern Europe.

(Source: Fitch Solutions)

UK offers 1 billion pounds to firms hit hardest by Omicron Published: 22 December 2021

  • Britain announced on Tuesday 1 billion pounds ($1.3 billion) of extra support for businesses hit hardest by the wave of Omicron variant coronavirus cases, which is hammering the country's hospitality sector and other businesses. 
  • Finance minister Rishi Sunak said he was confident the measures would help hundreds of thousands of businesses. But he added that he would "respond proportionately and appropriately" if the government were to impose further restrictions to slow Omicron. 
  • For now, hospitality businesses in England are not subject to any new legal restrictions despite a 60% surge in COVID-19 cases over the past week, which has taken the number of infections to around 90,000 a day. 
  • Prime Minister Boris Johnson said there was not enough evidence to justify new COVID-19 restrictions in England before Christmas, but the situation remained extremely difficult and the government might need to act afterwards.

(Source: Reuters)

BOJ Raises Policy Rate for Third Consecutive Month Published: 21 December 2021

  • The Bank of Jamaica (BOJ) increased its policy interest rate (the rate offered to deposit-taking institutions on overnight placements with BOJ) by 50 basis points to 2.50% per annum, effective 21 December 2021. 
  • The decision to further reduce the level of monetary policy accommodation was made by a unanimous vote by the Bank’s Monetary Policy Committee (MPC). The move was based on the committee’s assessment that inflation for November 2021 of 7.8%, although lower than the 8.5% recorded in October, breached the upper limit of the Bank’s target range and was likely to continue to successively breach the target range over the next 8 to 10 months. 
  • The risks to the inflation forecast are assessed to be skewed to the upside. Upside risks (which means that inflation could track above the forecast) include further increases in inflation expectations, stronger pass-through of international commodity and shipping prices to domestic prices, higher inflation among Jamaica’s main trading partners and the impact of adverse weather on agricultural food prices. Downside risks include lower energy-related prices and lower domestic demand. 
  • The October 2021 inflation expectations survey published by the BOJ indicated that the point-to-point inflation for December 2021 is expected to be about 7.8%. This represents an upward trend in the results from 7.1% and 6.7% for September and July, respectively. In line with this, market participants had rightfully anticipated another rate hike from the BOJ. Of note, over the last 8 months, inflation expectations have been consistently above or at the upper end of the BOJ’s target range. However, since September, it has been trending higher. 
  • Central Banks in developed nations are beginning to tighten monetary policy, with the Bank of England raising interest rates to 0.25% from 0.1% in response to calls to tackle surging price rises. In the US, a senior Federal Reserve official has noted that it could raise rates as early as March 2022 in the face of alarmingly high prices. As prices continue to surge we could see more central banks around the world, raising interest rates and could market the end  of one of the longest periods of low interest rates.

 (Sources: BOJ & NCBCM Research)

Record Air Passenger Arrivals Show Strength of Tourism Recovery Published: 21 December 2021

  • Minister of Tourism, Hon. Edmund Bartlett, says the 7,000 airline passengers, who arrived at the Sangster International Airport (SIA) in St. James on December 11, is a prelude of what is to come for the winter season. 
  • This was a single day record since the reopening of air travel on June 15, 2020, and Minister Bartlett noted that tourism is rebounding and showing signs of its former strength. Such a large number of air passengers into Jamaica’s largest airport in just one day is a clear indication that demand for Jamaica’s tourism product remains strong. 
  • A total of 52 flights from commercial, charter and private aircraft landed at SIA on December 11. Minister Bartlett said that to meet the higher demand for Jamaica, American Airlines recently upgraded the aircraft utilised on flights to Montego Bay from its major city hubs of Dallas/Fort Worth, Miami, and Philadelphia. 
  • Based on feedback from several of Jamaica’s key international tourism partners, the country is progressing well on its path to recovery and expects to welcome approximately 1.5Mn visitors this year. This is largely due to the success of the comprehensive JAMAICA CARES programme, which ensures that travelers feel safe and confident in choosing our island for their visits. 
  • There has also been an increase in cruise arrivals and that 90% of all planned tourist investments remain on track. Furthermore, the minister said that barring the unforeseen, the sector is set to recover faster than anyone would have predicted 12 months ago. Notwithstanding, the Omicron COVID-19 variant, which is spreading in Jamaica’s key source markets, remains a threat to the anticipated performance of the sector.

(Source: JIS News & NCBCM Research)

Omicron Could Reverse Latin America's Progress In Containing Pandemic Published: 21 December 2021

  • For this week, Fitch Solutions will be watching the development of the Omicron variant of COVID-19 in both Latin America and the rest of the world for potential impacts on the agency’s growth outlook for the region. Latin America has come a long way towards getting the pandemic under control since mid-2021, as new cases have fallen sharply and the regional vaccination rate has pushed towards 80%. 
  • However, the first cases of Omicron in the region were reported in late November in Brazil, and it has been identified in seven countries including Mexico, Argentina and Chile as of December 17. Given the variant’s apparent higher transmissibility, there is a significant risk that it causes renewed spikes in cases in the coming weeks. 
  • The spread of the variant poses downside risks to Fitch’s forecast for Latin America to see 2.3% real GDP growth in 2022. New outbreaks could cause leaders across the region to re-impose restrictions on mobility. While restrictions on a city or state level would be a blow to private consumption, investment and economic confidence, Fitch does not believe there is sufficient political will to bring back national lockdowns of the intensity seen in Q220. 
  • The risk of lockdowns or reduced demand, due to concerns about the virus in many of Latin America’s trading partners, could weigh on commodity prices, demand for exports or remittances, dragging down growth across the region.

(Source: Fitch Solutions)

Over 2,300 jobs to be created in Guyana Published: 21 December 2021

  • Even as Guyana continues to contend with the effects of the COVID-19 pandemic and other external shocks, there has been a notable increase in the number of opportunities for Guyanese nationals, with the latest symbol of this being the approval of 48 private projects which, collectively, have the capacity to create over 2,300 jobs. 
  • The local economy has been a magnet for investors who have expressed an interest to invest in massive projects across the various economic sectors. 
  • Of the 48 projects which have been approved, 17 are in the services sector, 17 in the manufacturing sector, five in agriculture, four in mining, three in forestry, two in tourism, two in Information and Communications Technology and one in the energy sector.  
  • Those project proposals signal the growing interest and confidence in the local economy, from both Guyanese and foreigners. Noteworthy amidst this advancement is the fact that 33 of the approved projects are from locals.


(Source: Guyana Chronicle)

Wall Street slides on COVID-19 worry Published: 21 December 2021

  • Wall Street's main indexes dropped more than 1% on Monday in a broad selloff as investors worried about a deluge in COVID-19 cases potentially undercutting the economic rebound. 
  • All major S&P 500 sectors were lower as coronavirus cases surged in New York City and around the United States over the weekend, dashing hopes for a more normal holiday season. 
  • Britain's leader said he would take more steps to slow the spread of the Omicron coronavirus variant if needed, after the Netherlands began a fourth lockdown and as other European nations considered restrictions. 
  • "Typically what happens in Europe is a bit of a preview for what we see in the United States. So, if we see a lot more infections in the U.S., it could stress hospitals, make people less reluctant to get out, spend and partake in the economy. That's definitely a cause of concern," said Chris Zaccarelli, Chief Investment Officer at Independent Advisor Alliance.


WTO says goods trade fell in Q3, Omicron raises risks Published: 21 December 2021

  • The World Trade Organization said on Monday that the global merchandise trade fell by 0.8% in the third quarter, adding that the emergence of the Omicron coronavirus variant had raised the risk of missing the forecast 2021 growth rate. 
  • Trade volume slipped between July-September due to supply chain disruptions, shortages of production inputs, and rising COVID-19 cases, the WTO said in a statement on its website. 
  • A 2021 growth target could theoretically still be met, it said, but the emergence of Omicron has "tipped the balance of risks towards the downside, increasing the chance of a more negative outcome."

(Source: World Trade Organization)

Inflation Has Fallen to 7.8% for November 2021; Still above BOJ’s Target Range Published: 17 December 2021

  • For the month of November, the All-Jamaica Consumer Price Index (CPI) remained relatively unchanged. November’s outturn meant that point-to-point inflation was 7.8% in the 12 months to November 2021, down from the 8.5% reported in October 2021. Despite the reduction in inflation for the 12 months to November, it remains outside the BOJ’s target range of 4% to 6%. 
  • While there were increases in most divisions, the overall movement in the inflation rate was tempered by a 1.8% decline in the index for the heavily weighted ‘Food and Non-Alcoholic Beverages’ division. Lower prices for some agricultural produce such as yam, tomato, and cabbage, due to improvements in local supplies was the primary driver of the fall in the Food and Non-Alcoholic Beverages Division. 
  • That being said, increases were observed in the index for the ‘Housing, Water, Electricity Gas and Other Fuels’ division (+2.8%) due to increases in the electricity, water and sewage rates and the ‘Transport’ division (+0.6%), due mainly to higher petrol prices. 
  • According to the BOJ’s forecasts made on November 16, 2021, inflation is projected to average between 5.5% and 6.5% over the next two years. Inflation will continue to breach the upper limit of the Bank’s target range over the next 10 to 12 months with the rate projected to peak in the range of 8.0 per cent to 9.0 per cent over this period. The October 2021 inflation expectations survey published by the BOJ indicated that point-to-point inflation for December 2021 is estimated to be about 7.8 per cent. This represents an upward trend in the results from 7.1% and 6.7% for September and July, respectively. 
  • As a means to guide inflation back within the target range over the next two years, the Bank of Jamaica (BOJ) increased its policy interest rate, by 50 basis points to 2.00% per annum, effective 17 November 2021. This is in line with Fitch’s projection of a 2.00% policy rate by the end of this year. The Bank of Jamaica is expected to hike its benchmark interest rate by 75 basis points (bps) to 2.75% by the end-2022 according to Fitch Solutions. 
  • Given, its original forecast that the local economy was showing strong signs of recovery local market and the rise in inflation expectations, participants widely expect the BOJ to increase its policy rate when it meets on December 20. However, the emergence of the Omicron variant of the COVID-19 risks presents a downside risk to the local economic recovery. There has been a spike in hotel booking cancellations globally which will threaten the rate of recovery in global tourism, limiting the contribution of the local tourism sector to local economic recovery.

 (Sources: STATIN, BOJ & NCBCM Research)

Tourism Stakeholders Predict Best Winter Season Since 2019 Published: 17 December 2021

  • Minister of Tourism, Hon. Edmund Bartlett says Jamaica’s tourism recovery will be guided by a “Blue Ocean Strategy” where market boundaries can be reconstructed by the actions and beliefs of industry players. 
  • This strategy involves the simultaneous pursuit of differentiation and low cost to open a new market space and create new demand. This will also allow for creating and capturing uncontested market space, making the competition irrelevant. It is based on the view that market boundaries and industry structure are not a given and can be reconstructed by the actions and beliefs of industry players. 
  • The strategy will see the Tourism Ministry pursuing enhanced value-creation, through product differentiation and diversification, which will allow Destination Jamaica to be more sustainable, appeal to new markets, and stimulate new demand. 
  • Current trends indicate that post – COVID-19 international travellers will prefer sustainable destinations and the pandemic creates an opportunity for global leaders to transition their tourism industries by creating policies that balance economic growth with social and environmental concerns. Minister Bartlett noted that tourism development strategies and practices must be increasingly designed with the view of promoting more resource-efficient initiatives that are aligned with goals of sustainable consumption and production.

(Source: JIS News)