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Barbados to Slash Taxes By 50% For Regional Travelers Published: 21 July 2021

  • Barbados will be going the same route as its Caribbean neighbour Antigua and Barbuda in slashing airport taxes for regional travelers by as much as 50%. 
  • Minister of Tourism and International Transport, Lisa Cummins, made the disclosure on Tuesday during a meeting with tourism stakeholders at the Hilton Barbados.  
  • "Cabinet has agreed that there is to be a 50% reduction in airport service charge for regional travelers. That brings us in line to what you have been hearing coming out of other markets. Particularly, one market that has already announced it is Antigua, where there is a 50% reduction. 
  • Cummins also revealed a slew of initiatives, aimed at boosting Barbados' tourism product. The move to reduce the taxes came a year after Prime Minister Mia Mottley announced that it was a step her administration was examining.

(Source: Barbados Today)

 

Spending Cuts, Demographics to Weaken Puerto Rico's Long Term Growth Published: 21 July 2021

  • Over the coming decade, Puerto Rico is likely to see a short-term peak in economic growth, fueled by federal aid inflows and a rebound from the COVID-19 pandemic, which will fade as structural headwinds return to the fore. 
  • Fitch Solutions expects that an influx of federal aid will fuel a return to growth in Puerto Rico, stimulating both private demand and the construction industry as the island continues to rebuild from hurricanes Irma and Maria, which hit in September 2017, and a series of earthquakes in early 2020. 
  • After a 3.2% contraction in FY2020 (July 2019-June 2020) due to COVID-19, growth is forecast to eventually return to positive territory by FY22 as federal aid arrives and the rollout of vaccines allows domestic activity to recover. Growth of 1.8% is anticipated from FY2022 to FY2025. 
  • However, as federal aid declines in the years thereafter the impact of fiscal austerity, a poor operational environment and a shrinking labour force will weigh on Puerto Rico’s economic growth. 
  • Notwithstanding, the agency also notes a number of positive trends, including the likely resolution of Puerto Rico’s bankruptcy, growth in the pharmaceutical and tourism sectors and a series of economic reforms which could boost the territory’s long-term upside.

(Source: Fitch Solutions)

The EM Tightening Cycle Begins Amid Continuing DM Dovishness Published: 21 July 2021

  • With price pressures building up globally and public debt loads historically high, policymakers will seek to balance concerns about inflation against efforts to support the recovery while keeping public finances on a sustainable path. 
  • Unlike in developed markets (DMs), concerns over the feed-through impact of rising inflation on staples, especially food, have prompted emerging market (EMs) monetary authorities to reverse their hitherto dovish bias and start tightening, although only gradually. Given that this will be a gradual adjustment, Fitch Solutions expects that EM interest rates will remain very low by historical standards in both 2021 and 2022. 
  • The pace of policy normalization will be significantly slower in DMs. Fitch solutions expects that most central banks will only start raising interest rates between 2023 and 2024, even though risks to their view have shifted to the upside due to rising inflation, implying the possibility of hikes in 2022. 
  • Developed markets’ central banks will retain an ultra-dovish bias through to 2022 to support the economic recovery as policymakers have expressed a willingness to tolerate above-target inflation for a time in order to support growth. They also believe that output will remain below pre-pandemic levels in many DMs in 2021. Among the top eight DMs by the end of 2021, only Australia and the US will be bigger than they were before COVID-19. 
  • Fiscal deficits are expected to narrow in 2021 but will remain far wider than pre-crisis levels due to concerns about choking off the recovery in the event of a premature tightening of fiscal policy.

(Source: Fitch Solutions)

Seizing the Opportunity for a Pro-Growth, Post-Pandemic World Published: 21 July 2021

  • In the year ahead, as more vaccines roll off the production line, more people get jabbed, and more economies gradually reopen, policymakers need to engineer a fundamental shift from saving their economies from collapse, to strengthening their economies for the future with growth-oriented reforms. 
  • Enhanced debt restructuring mechanisms should help resolve unviable firms expeditiously and channel investment to new ideas and companies. Stronger active labour market policies, including job-search monitoring and support, and retraining should help workers shift to more promising jobs in dynamic parts of the economy. 
  • Using this moment for some of these difficult reforms means that the monetary and fiscal stimulus still flowing will serve as a springboard to a brighter and more sustainable future rather than a crutch to a weaker version of the pre-COVID-19 economy. Seizing the opportunity could deliver years of solid post-COVID-19 growth and progress in living standards. 
  • The IMF estimates that comprehensive growth-enhancing reforms cutting across product, labour, and financial markets could raise annual growth in GDP per capita by over one percentage point in emerging market and developing economies in the next decade. These countries would be able to double their speed of convergence to advanced economies’ living standards relative to the pre-pandemic years.

(Source: IMF)

Jobs Increase by 15% in BPO Sector Published: 20 July 2021

  • The number of jobs in the Business Process Outsourcing (BPO) sector increased by 15.0% over the past year, with 44,000 people employed in the sector as of June 30, 2021, relative to 38,400 people over the same period last year. 
  • Minister without Portfolio in the Ministry of Economic Growth and Job Creation, Senator the Hon. Aubyn Hill, who made the disclosure, said this increase in jobs happened despite the economy shrinking by over 10.0% during the same period. 
  • “I am extremely pleased to tell Jamaicans that in the year to June 30, 2021, the BPO Services sector brought in US$780 million to the Jamaican economy. That’s no small sneeze during a time when our economy was shrinking,” he said, while making his contribution to the State of the Nation Debate in the Senate, on Friday (July 16). 
  • Hill stressed that the Government truly appreciates the commitment of cash, management and energy that the 87 operators in the sector, including 10 Fortune500 companies, have made to Jamaica and the thousands of jobs these investors have provided for so many Jamaicans. 
  • “This Ministry of Economic Growth and Job Creation will continue to do everything in our power and within the law to provide the support and ease-of-operation these investors need to run their businesses,” he said.

(Source: JIS)

RJR Group’s Bottom-Line Improves Due to Cost Reduction Initiatives Published: 20 July 2021

  • Owing to lower costs, for its financial year ending March 2021, the RJR Communications Group reported a 354.4% increase in net profit to $170.66Mn (EPS: $0.07). 
  • Due to cost cutting initiatives, direct, selling and other operating expenses fell by 11.6% (or $298.98Mn), 19.2% (or $164.17Mn) and 32.7% (or $299.80Mn), respectively. During the year there was a reduction in newsprint usage, programming and salary costs, directly related to adjustments made in response to reduced revenues, and other cost containment measures pursued. Additionally, the company reduced expenditure on special events and other expenses that normally went towards boosting sales effort. 
  • For the year, the company’s revenues declined by 7.2% (or $400.30Mn) to $5.19Bn, driven by reductions in sales from the audio ($32.00Mn or 4.0%) and print division ($529.00Mn or 19%). Nevertheless, there was an increase in sales from the audio/visual division which grew by $162.00Mn (or 7.0%), but it was not enough to offset the contraction from the print division. The increase in revenues from the audio/visual division was attributed to collaborations with the Ministry of Health and Education, along with the staging of general elections during the year. 
  • RJR’s stock price has depreciated by 1.2% since the start of the year to $1.69, and currently trades at a P/E of 24.1x earnings which is above the main market sector average of 20.5x earnings.

(Source: Company Financials)

Costa Rica Seeks to Attract Investors and Pensioners for Reactivating the Economy Published: 20 July 2021

  • The Costa Rican President, Carlos Alvarado, during a virtual act signed a law to attract investors, rentiers and pensioners that provides benefits such as incentives for import taxes and exemption of 20% of the transfer tax, among others. 
  • With the legislation, whoever wishes to opt for a temporary residence as an investor must demonstrate to the Directorate of Migration and Foreigners a minimum investment of $150,000, down up from $200,000 in real estate, registrable assets, shares, securities and productive projects or projects of national interest. 
  • The benefits include a duty free and all import taxes present only once, for the importation of household goods, while the amounts declared as income to become a creditor will be exempt from income tax. Beneficiaries may also import up to two land, air or sea transportation vehicles, for personal or family use, free of all import, tariff and value-added taxes. 
  • According to the Minister of Tourism, Gustavo Segura, it is intended to produce a necessary revitalization of the economy and a recovery of the levels of foreign investment, which now represents 3.5% of GDP, down from 7.8% a decade ago.

(Source: The Costa Rica News)

Dominican Republic To Improve Digital Connectivity With $115Mn IDB Loan Published: 20 July 2021

  • The Dominican Republic will improve connectivity to boost access to digital services as well as people’s adoption and continuity of such services with help from a $115Mn loan approved by the Inter-American Development Bank (IDB). The project will finance investments to expand broadband infrastructure, including the expansion of backbone, aggregation and access networks in order to improve connectivity for the country’s citizens. 
  • The operation will include private sector participation and support the deployment of infrastructure in areas that would not be economically profitable on their own, thus ensuring resource optimization. With this approach, both the public and the private sectors will contribute to reduce the digital gap and foster the sustainability of this type of infrastructure in the country. 
  • In addition, the IDB’s project will endorse moves to improve broadcasting services, paving the way for transitioning from analog to digital television and enhancing digital abilities and competencies. One key aspect of the project is its promotion of policies that support digital dividend spectrum auctions in order to boost universal access. 
  • The IDB is financing the project with a $115Mn loan for a 25-year term, a 6.1-year grace period, and interest rate based on LIBOR. The project is expected to help raise annual GDP by 1.46%, boost productivity by 1.2 percent, and generate 33,000-plus jobs.

(Source: IDB)

The Resilience of Private Balance Sheets in Europe during COVID-19 Published: 20 July 2021

  • One positive out the pandemic is how little damage it has inflicted on average household and corporate balance sheets in Europe. 
  • In the past, recessions were followed by protracted weakness as they left households and businesses with significantly higher debt and lower-income and capital. So far this has not been the case with the COVID-19 crisis, largely thanks to the extraordinary policy response by governments and central banks. 
  • The new IMF staff research, observes the resilience of private sector balance sheets. It uses a simple balance sheet vulnerability index, which combines measures of leverage (or indebtedness) and liquidity. Based on the index it can be seen that despite the collapse in GDP in European Union countries and the United Kingdom in 2020, business and household balance sheets in Europe were slightly affected on average. 
  • Even in the worst phase of the crisis last year, the index for the corporate sector in Europe only fell marginally and by the end of 2020, the index improved. European household balance sheets also improved on aggregate in 2020, despite higher unemployment and shorter working hours. People stayed home more and spent less, while policy measures supported their income. 
  • The question arises if business and household balance sheets did not bear most of the losses from the COVID-19 crisis in Europe, then who did? The short answer is the public sector. The public accumulated more debt to mitigate the effects of the pandemic.

(Source: IMF)

Key Global Monthly Views: Vaccine Access Resulting In Two-Speed Recovery Risks Published: 20 July 2021

  • The global economic recovery remains strong, as such Fitch Solutions has maintained its 5.7% global growth forecast despite several upward revisions, mostly in Europe. The cause of the upward revisions was mostly attributed to faster than anticipated vaccination programmes.  However, Fitch's estimate remains below the consensus (6.0%) as they believe that while growth will continue over the coming quarters it is in the process of peaking. 
  • Although purchasing managers' index readings remain quite positive across the 26 economies that Fitch tracks regularly, readings declined in 10 economies from April to May 2021, which suggests that activity in several economies may be peaking. 
  • In particular, it can be highlighted that there are mounting downside risks to growth in emerging markets given a sharp rise in COVID-19 infections amid a slow vaccine rollout, rising nominal interest rates as central banks tighten policy in response to rising inflation and increasing political risk. 
  • In terms of cross-asset strategy, Fitch’s views remain unchanged from June 2021, and risk appetite has remained fairly positive, but they note some minor shifts. For example, the decline in US bond yields, which was likely a re-pricing of growth and inflation to the downside. This could provide some support to equity markets over the coming months but could also be signaling some challenges to the US and global growth. 
  • Moreover, low nominal bond yields and elevated inflation that compress real bond yields in the US could see the US dollar index continue to trade sideways over the near term. Emerging markets are also now facing several risks that could weigh on the performance of their assets.

(Source: Fitch Solutions)