• After decades of consistent deficits, Fitch expects Guyana's current account balance will maintain a wide surplus over the coming years, underpinned by strong growth in oil exports.
• Fitch estimated that the current account surplus reached 30.6% of GDP in 2022 (from a deficit of 28.9% of GDP in 2021) as the start of production at ExxonMobil’s second offshore operation in the Stabroek block in February 2022 drove a 159.4% increase in goods exports.
• The current account surplus will narrow to 24.9% of GDP in 2023 as oil-related capital investment, rising government spending and stronger household purchasing power fuel robust import growth.
• Nonetheless, with several new offshore projects due to come online, fueling greater oil exports, Fitch expects Guyana will post a wide current account surplus averaging 26.7% of GDP over 2023-2027.
• Additionally, the country’s capital account will remain in deficit over the coming years (the capital account flipped from a surplus of US$2.1Bn in 2021 to a deficit of US$3.7Bn in 2022) as oil companies recover costs, but healthy foreign direct investment (FDI) inflows and growing international reserves should minimise risk to Guyana’s external account stability over the coming years. 

(Source: Fitch Solutions)

• Brazilian President Luiz Inacio Lula da Silva's government published an executive order aimed at increasing revenue by taxing the capital income from financial investments obtained abroad by individuals who reside in Brazil.
• Income earned from January 1, 2024, will be considered for that purpose, said the text of the measure published on Sunday night that takes effect immediately. It must be voted on by Congress within four months to become permanent law.
• According to the text, income obtained abroad from financial investments will be taxed upon the sale or maturity of assets, while profits and dividends from controlled entities will be taxed on December 31^st of each year. The measure also includes the taxation of assets in trusts.
• Income up to 6,000 reais (US$1,203) will be tax-exempt, while income above that but below 50,000 reais will be taxed at 15%. Income exceeding 50,000 reais will be taxed at 22.5%.
• The Finance Ministry said the measure has the potential to collect around 3.2 billion reais (US$641Mn) in 2023, close to 3.6 billion reais in 2024 and 6.7 billion reais in 2025.
• The measure was published in an extra edition of the official gazette, but Lula did not mention it during his Labour Day speech last Sunday, where he pledged to introduce a new policy of real increases in the minimum wage and announced plans to raise the income tax exemption for lower-income earners.
• Leftist Lula's economic team has emphasized that the government will seek to balance public accounts by taxing those who should but are not paying taxes. However, Sunday's measure was not disclosed on official government channels.

(Source: Reuters)

• A fight between Republicans and Democrats over the debt limit ceiling could send the U.S. economy into a recession. Even if the standoff doesn't actually trigger a debt default, analysts say a much worse downturn could occur with perhaps 7.5 million people thrown out of work.
• Already some corners of the vast market for U.S. debt are feeling a sharp pinch after Treasury Secretary Janet Yellen on Monday said that by early June the government may run short of the money to stay current on its bills - whether they are payments owed to foreign or domestic investors in Treasuries, federal employees and contractors or Social Security pensioners.
• Total government spending on average is about $525 billion a month. A big chunk of that, about $225 billion on average in the first quarter, is deficit spending. Hitting the debt ceiling would mean the government could no longer run that budget shortfall, delivering an immediate blow to millions of Americans who rely on government money directly or indirectly.
• The market reaction from an unprecedented U.S. default would bludgeon away billions more in wealth, and while analysts have floated a few workarounds to keep money flowing, including invoking a constitutional provision that would likely face challenges in court, all are untested.
• Investors are taking the risk seriously. Yields on as much as $650 billion of Treasury securities maturing in the first half of June rocketed to record highs after Yellen's announcement, reflecting the increased chance that they may not be paid off on schedule. The cost to insure U.S. government debt against default has shot to the highest since the 2007-2009 financial crisis.
• Nationwide Chief Economist Kathy Bostjancic was already expecting a recession later this year, as the Federal Reserve's rapid-fire interest-rate hikes aimed at battling inflation raise borrowing costs for households and businesses and slow bank lending. All of that takes air out the economy's tires and could start to push up the unemployment rate, now at a historically low 3.5%.

(Source: Reuters)

• The European Central Bank raised interest rates by 25 basis points to 3.25% as expected on Thursday and signalled that more tightening would be needed to tame inflation. This announcement came a day after the U.S. Federal Reserve also raised its benchmark rate by a quarter of a percentage point – in its case to a 5.00-5.25% range – but hinted that could be the last in a historic series of hikes.
• "We are not pausing - that is very clear," ECB President Christine Lagarde told a press conference. "We know that we have more ground to cover." Lagarde said there were still big upside risks to inflation, notably from recent wage deals and high corporate profit margins, and that financial conditions were still not sufficiently tight. She noted that the bank's written statement made reference to future "policy decisions" in the plural, possibly suggesting more than one further hike.
• The ECB observed a slowdown in the eurozone after three consecutive 50 basis point increases, this data comes only days after eurozone banking data showed the biggest drop in loan demand in over a decade. That suggests previous rate rises are working their way through the economy and that ECB policies are now restricting growth.
• "Rate decisions will continue to be based on its assessment of the inflation outlook in light of the incoming economic and financial data, the dynamics of underlying inflation, and the strength of monetary policy transmission," the ECB said in a statement issued before the press conference.

(Source: Reuters)

• The Government intends to introduce new energy sources that will make power generation in Jamaica more reliable, available, and affordable. Speaking at the opening ceremony of Expo Jamaica 2023, at the National Indoor Sports Centre in Kingston on April 27, Prime Minister, the Most Hon. Andrew Holness, said the Government has embarked on a path to ensure that 50% of Jamaica’s energy is generated from renewable sources.
• “We are currently doing a new integrated resource plan to make sure that when we do introduce more green energy, up to 50%, that the entire grid is stable, and that the capacity has been increased,” Mr. Holness said.
• “So, we are looking at pumped hydro storage…looking at the Mahogany Vale project, which I announced as an important element in our energy mix. I have also met with the International Atomic Agency. Jamaica has to explore new technology in nuclear energy, small nuclear plants to generate energy in Jamaica, which will be cheaper, more stable and more affordable,” he added.
• As it relates to the Vale Project, in March 2023, funds were allocated in the budget to develop the dam as a national priority. The project will form part of a major integrated water and energy project utilising the well-established Pumped Hydro Storage and Hydro Electricity concepts, which the Prime Minister announced last year, to solve Jamaica’s water and energy problems and to make the island a truly green country.
• He also maintained that the Government is serious about insulating the economy from energy shocks and high energy prices. However, these initiatives will not all materialise in two years, and may take up to a decade to be completed.

(Source: JIS)

• Fitch Solutions maintains its forecast that real GDP in Barbados will grow by 4.9% in 2023, down from an estimated 10.0% in 2022.
• The company’s core view remains that exports will be the primary driver of headline growth, contributing 4.3 percentage points (pp) to GDP in 2023, down from 8.5pp in 2022 as it expects activity to moderate as global demand for foreign travel softens.
• Nonetheless, the ongoing post-pandemic recovery in tourism will sustain growth above historical averages over the coming quarters, though momentum will fade amid headwinds from weaker global growth and elevated inflation.
• Preliminary data show GDP growth reached 6.4% y-o-y in Q123, a deceleration from 9.5% in Q422, and Fitch expects growth momentum will continue to wane over the coming quarters for reasons previously mentioned.
• Nonetheless, Fitch still expects growth will remain comfortably above the pre-pandemic average of 0.7% over 2015-2019, driven primarily by the ongoing recovery in tourism, which comprised around 30% of the total economy in 2019.
• The risks to the short-term outlook are toward the downside given Barbados' sensitivity to external price shocks, particularly if there is disruption to international travel and tourism. 

(Source: Fitch Solutions)

• A technical mission from the International Monetary Fund (IMF) agreed to disburse US$527Mn to Costa Rica after completing the fourth review of the authorities' reform programme, it said on Friday, April 28.
• The agreement is subject to approval by the IMF Executive Board, contingent on the implementation of a prior action by the authorities linked to implementing the public employment law.
• The implementation of the public employment bill seeks to create a single framework for employment in the public sector, with eight salary scales. This initiative will make the current fragmented public salary system more equitable and efficient by ensuring fiscal sustainability, improving the equity and efficiency of the public administration, and strengthening social safety nets and tax compliance.
• The decision comes as Costa Rican authorities continued to move forward with their comprehensive economic reform programme, IMF said in a statement, adding the reforms aim to make the tax system more efficient and fairer, will strengthen social protections, and reduce labour market informality.
• Additionally, the IMF also said that Costa Rican authorities were moving forward with an "ambitious agenda to green the economy". In other words, the Costa Rican authorities aim to transition to an urban green economy by decarbonising its Greater Metropolitan Area through sustainable integrated urban planning.
• The country’s performance under the previous programme has been strong, and all quantitative targets have been met. There was broad agreement that the overall policy stance should remain focused on bringing inflation back to target (3% ± 1%) and keeping public debt on a firm downward path. This would help protect the poor (who are worst affected by high inflation) and could be achieved while still expanding targeted support for the most vulnerable.
• The financial institution also said it sees Costa Rica's Gross Domestic Product (GDP) growth moderating to 3.0% in 2023, after growing 4.3% last year. Headline inflation has also been on a steady downward path and is projected to be within the Central Bank of Costa Rica (BCCR)’s tolerance range around the target later this year. 

(Sources: IMF & Yahoo Finance)

• The Federal Reserve on Wednesday raised interest rates by a quarter of a percentage point and signalled it may pause further increases, giving officials time to assess the fallout from recent bank failures, wait on the resolution of a political standoff over the U.S. debt ceiling, and monitor the course of inflation.
• The move marks a new stage of the U.S. central bank's management of the recovery from the COVID-19 pandemic, with what may be its final rate hike of the current tightening cycle and heightened attention to risks facing the economy.
• The unanimous decision lifted the Fed's benchmark overnight interest rate to the 5.00%-5.25% range, the tenth consecutive increase since March 2022.
• In an overt shift, the central bank no longer says it "anticipates" further rates will be needed, only that it will watch incoming data to determine if more hikes "may be appropriate."

(Source: Reuters)

• JPMorgan Chase & Co said on Monday it will buy most of First Republic Bank's assets after regulators seized the troubled lender over the weekend, marking the third failure of a major U.S. bank in two months. Under the deal, which came after an auction, JPMorgan will pay $10.6 billion to the U.S. Federal Deposit Insurance Corp (FDIC) for most of the assets of the San Francisco-based bank, whose failure is the largest since Washington Mutual in 2008.
• JPMorgan, already the biggest bank in the United States, has also entered into a loss-share agreement with the FDIC on single-family, residential, and commercial loans it bought, but will not take First Republic Bank's corporate debt or preferred stock. The deal allows for an orderly failure of First Republic and avoids regulators having to insure all the bank's deposits, as they had to do when two others collapsed in March.
• JPMorgan has been on a buying spree since 2021, acquiring more than 30 companies in deals totalling more than $5 billion. U.S. regulators have been slow to approve large bank deals in recent years, while the Biden administration has also cracked down on anti-competitive practices.
• First Republic disclosed last week that it had suffered more than $100 billion in outflows in the first quarter and was exploring options, increasing stress in the banking sector. Global banking has been rocked by the closure of Silicon Valley Bank and Signature Bank in March, while Switzerland’s Credit Suisse had to be rescued by rival UBS. First Republic shares tumbled 43.3% in premarket trading on Monday before they were halted. The bank’s stock has lost 97% of its value this year. JPMorgan shares rose 2.7%.

(Source: Reuters)

• One on One Educational Services Limited has recorded a net profit of $10.68Mn for the second quarter of the financial year ending February 28, 2023. This represents a 72.8% yoy increase. For the six months ending February 28, 2023, profit totaled $17.41Mn, up 96.2%.
• Revenue for the quarter was up by 17.5% yoy to $72.59Mn, which supported a 47.3% increase for the six months to $153.45Mn. This was mainly driven by increases in the business-to-customers (B2C) and business-to-business (B2B) revenue lines. The increase in revenues was also driven by new contracts acquired and ongoing contracts from the previous financial year.
• Additionally, the company benefited from economies of scale in executing projects, resulting in a $4.48Mn (27.4%) decline in direct costs for the quarter, 6.7% decline to $26.76Mn for the six months.
• The company’s bottom-line was; however, tempered by a $21.73Mn (63.0%) increase in operating expenses to $56.21Mn when compared to the same period in 2022. Operating expenses for the six-month period amounted to $110.09Mn, representing an increase of $43.62Mn or 65.6%. This was due to various factors, including staff cost for developing and expanding new products initiatives, promotional activities to increase awareness of the company’s products, software license fees to support its remote office operations and registration fees associated with the listing of the company.
• One’s stock price has decreased by 5.67% since the start of the calendar year. The stock closed Thursday’s trading session at $1.16 and currently trades at a P/E of 96.7x which is significantly above the Junior Market Others Sector Average of 22.3x. As the company moves forward with its growth strategy and takes advantage of the reopening of the economy, we expect to see an improvement in its earnings per share, which should help improve its P/E ratio.
• As the company moves into Q3, there is optimism surrounding its growth in all of its divisions. The launch of the OneAcademy and the continued expansion of the government and business divisions are expected to be key drivers of growth over the next quarter.

(Sources: JSE & NCBCM Research)