• Barbados’ economy remains severely depressed by the ongoing global coronavirus pandemic. While tourism is expected to recover gradually in the second half of 2021 and the first half of 2022, risks to the outlook remain.
• Despite this very challenging environment, Barbados continues to make good progress in implementing its ambitious and comprehensive economic reform program, while expanding critical investments in social protection.
• Indicative targets under the Fund-supported program for end-June 2021 were met, and since then international reserves have been further boosted by the recent global SDR allocation.

(Source: IMF)

• U.S. and global equity benchmarks hit all-time highs on Monday, as the Federal Reserve appeared in no rush to step away from its massive stimulus. The S&P 500 and Nasdaq also rose to all-time highs as dovish remarks from the Fed last week bolstered optimism in an economic rebound and eased fears of a sudden tapering in monetary stimulus.
• The S&P 500 gained 0.43%, to 4,528.76 and was on track to finish the month up more than 3%, and the Nasdaq Composite added 0.9% to 15,265.72 as investors jumped into technology stocks. High-growth tech stocks tend to benefit from expectations of lower rates because their value rests heavily on future earnings.
• The Europe-wide STOXX 600 rose 0.07% and was on course to end August with a rise of more than 2% its seventh month of gains in what would be its longest such winning run in over eight years. Asian stocks hit a two-week high and Japan's blue-chip Nikkei closed up 0.5%.
• Overall the positive sentiment in equity markets was underpinned by the Fed Chair Jerome Powell speech in which he said that the tapering of stimulus measures could begin this year. Additionally, it was due to the announcement that there will be no immediate change in interest rates after its bond tapering. 

(Source: Reuters and NCBCM Research)

• Oil prices rose for a third straight day on Monday but settled slightly off their highs as Hurricane Ida’s influence on U.S. energy installations weakened after making an initial powerful landfall. New York-traded West Texas Intermediate, the benchmark for U.S. oil, settled at $69.21 per barrel, up 47 cents, or 0.7%. It hit $69.34 at the session highs.
• Oil’s highs for the day were also limited by reports that producer group OPEC+ was going ahead with a planned production hike for September despite a recent resurgence of Covid cases across the world that could once again weigh on energy demand.
• “Crude prices are stuck in wait-and-see mode until the energy traders have a better handle of what will be the full impact of Hurricane Ida with US production,” said Ed Moya, analyst at New York’s OANDA. “Airlines across the board are cutting their schedules and the plateau for air travel is in place. Concerns are brewing that we might not see strong holiday demand.”
• Industry officials initially estimated that it could take weeks for supplies to normalize. But as the storm weakened, many adjusted their expectations, with some even worrying whether a drop in demand for air travel could weigh instead on oil prices going forward.

(Source: Investing.com)

• The Americas continues to be the epicentre of the pandemic and more than 101.0Mn children across Latin America and the Caribbean have been hit harder by school closures than their peers in any other region.
• Considering this, school reopening is a priority for governments, but the Pan American Health Organization (PAHO) is recommending that member countries adopt a phased approach to reopening schools for face-to-face learning in the 2021/22 academic year, in light of the still evolving coronavirus pandemic.
• This approach should take into consideration the local epidemiological situation, which can change rapidly. Proper surveillance will also be critical to ensuring that reopening is done safely and that the learning environment remains safe.
• Before reopening schools, countries must ensure institutions can maintain COVID-19 prevention and infection control measures, including physical distancing, hand hygiene, and mask-wearing. This will help to prevent schools from becoming a catalyst for more COVID-19 community transmission.
• The safest way to reopen schools rests on countries’ abilities to suppress transmission through vaccination and the implementation of public health measures. The Jamaican government has begun to vaccinate children. However, if it is unable to vaccinate a significant portion of the student population and to contain the recent spike in the infection rate, it could delay the restart of in-person teaching.
• The potential persistence of school closures will continue to depress traffic activity adversely affecting the transportation sector and companies like TJH. It would also continue to affect revenue generation for some manufacturing and distribution companies such as Honey Bun and Purity which rely heavily on sales to schools.

(Source: JIS News & NCBCM Research)

• Private sector credit growth in Latin America is expected to slow in the quarters ahead according to  the Fitch Rating Agency as central banks across the region tighten monetary policy to clamp down on rising inflation.
• Moreover, financing needs will subside relative to 2020, when pandemic-induced losses boosted credit demand among households and businesses. Data through Q420 show strong private sector credit growth throughout 2020. In particular, H120 saw a surge in credit growth as households and businesses, supported by government stimulus measures, sought to cover losses amid the onset of the pandemic.
• Most Latin American central banks cut their policy rates to all-time lows and launched extraordinary monetary stimulus measures to support credit flows to households and businesses and prevent financial instability amid the crisis.
• That being said, recovering economic activity will likely place a floor underneath the slowdown in credit growth as businesses borrow to expand production amid rebounding demand and falling unemployment boosts household incomes.

(Source: Fitch Solutions)

• Brazil's Supreme Court on Thursday ruled that a law granting the central bank autonomy was constitutional, guaranteeing monetary policymakers a freer rein to tackle rising inflation after leftist opposition parties sought to strike down the measure.
• The 8-2 ruling is a boost for the credibility of monetary policy under President Jair Bolsonaro. Brazil's central bank has hiked interest rates aggressively to tame surging inflation amid an uneven economic recovery from the world's second-deadliest coronavirus outbreak.
• The law does not change how the bank sets interest rates but distances it from politics by setting fixed four-year terms for its governor and directors that will no longer coincide with the presidential election cycle.
• Bolsonaro has reportedly regretted enacting the law as sharp rate hikes threaten to hurt the economy next year when he runs for re-election. The bank's policymakers have also made indirect criticism of his efforts to raise public spending to win votes.
• Central bank sources told Reuters they were aware the president was unhappy with the law but said the bank had not faced any pressure from the president on policy autonomy.

(Source: Reuters)

• Southeast Asia’s bond and currency traders can afford to be less worried about a potential stimulus tapering by the Federal Reserve, with their markets better positioned to withstand external shocks this time around.
• Massive foreign reserves and undervalued currencies could shield the region’s markets from a potential selloff if Fed Chair Jerome Powell hints at tapering bond purchases at the Jackson Hole symposium this week.
• While there’s caution, analysts aren’t expecting a repeat of the so-called 2013 taper tantrum where the Fed’s surprise announcement to unwind stimulus roiled global markets.  
• “Partly due to the taper tantrum in 2013, Southeast Asia’s central banks now have better foreign-exchange-reserve cushions,” said Vishnu Varathan, head of economics and strategy at Mizuho Bank Ltd. in Singapore. “The degree of Treasury curve steepening appears far more subdued this time around, which may be conflated with reduced pressure for the capital flight out of Emerging-Asia.”

(Source: Bloomberg)

• U.S. corporate profits surged to a fresh record high in the second quarter, boosted by robust demand and higher prices, suggesting that an anticipated slowdown in economic growth this quarter because of soaring COVID-19 cases could be temporary.
• The jump in profits reported by the Commerce Department on Thursday was despite businesses facing increased costs owing to shortages of raw materials and labour. The resurgence in infections driven by the Delta variant of the coronavirus is chipping away demand for services like air travel and cruises, leading economists to cut their third-quarter growth estimates.
• “Based on the profits data, any slowdown in growth as a result of slower consumer spending is likely to prove temporary,” said Conrad DeQuadros, senior economic advisor at Brean Capital in New York.

(Source: Reuters)

• The balance sheets of deposit-taking institutions (DTIs) indicate that they continue to grow, are properly capitalized, and comply with prudential liquidity standards according to the Bank of Jamaica (BOJ).
• Governor Richard Byles noted that notwithstanding the moderating impact of the COVID-19 pandemic, loan growth for DTIs has remained fairly resilient, despite a slowdown in the pace of growth. The stock of private-sector loans and advances grew 8.8% year on year in March, relative to the 15.8% for March 2020. He added that although loan quality for the system is naturally showing some weakening, it remains well below the bank’s threshold for concern and is fully provided for by the system.
• Financial institutions have facilitated clients with approximately $210.0Bn in payment accommodations since the onset of the pandemic. Mr. Byles pointed out, however, that the outstanding stock of moratoria, as of February 2021, totaled $65.0Bn, reflecting a significant decline since the start of the pandemic.
• The BOJ Governor has said that the BOJ reached an agreement with finance holding companies (FHCs) and DTIs in April to resume the distribution of dividends to large shareholders, within the context of the fall in the stock of loans under moratorium, the improving economic environment as well as the financial system’s strong capacity to absorb unexpected losses.
• However, he emphasized that given that significant uncertainty associated with the pandemic remains, the Bank continues to urge financial institutions to remain prudent in their decision to declare and distribute dividends.

Source: (JIS News)

• The final seat allocations for the next term of Mexico’s Chamber of Deputies did not differ significantly from preliminary estimates, supporting Fitch’s view that President Andrés Manuel López Obrador’s agenda will be constrained moving forward.
• While AMLO’s Morena party remains the largest in the Chamber, its losses in June’s mid-term vote will force it to rely on allies to pass legislation. This will give these smaller parties significant leverage.
• AMLO’s government has signaled that it will submit a fiscal reform in September, which will be relatively modest in scope. The government will also submit its 2022 budget proposal in the coming weeks.
• Fitch Solutions reiterate that Morena’s losses are generally positive for economic confidence. Tax reform and the 2022 budget are likely to provide clarity around the new legislative dynamic in the coming months.

(Source: Fitch Solutions)