• The All Jamaica Consumer Price Index for August 2020 was 105.9, indicating an inflation rate of 0.2%. This increase was largely driven by the 1.2% increase in the index for the ‘Housing, Water, Electricity, Gas and Other Fuels’ division.
• The groups ‘Transport’ and ‘Recreation, Sport and Culture’ also recorded increases of 0.3% and 1.2%, respectively. However, these increases were moderated by a 0.5% decline in the index for the heaviest weighted division ‘Food and Non-Alcoholic Beverages’ due mainly to lower prices for vegetables for the review period.
• For the review period, the calendar year-to-date inflation rate was 3.4%, point-to-point 5.1%, and the fiscal year-to-date was 2.1% as of August 2020. At 5.1%, the inflation rate remains within the 4%-6% range targeted by the BOJ.

(Source: STATIN)

• The sharp contraction in tourism activity due to the Covid-19 pandemic will reduce Barbados’ large service trade surplus and lead to a substantial widening of its current account deficit.
• Sizeable international reserves and support from multilateral lenders will reduce risks to Barbados’ overall external account stability.
• Fitch Solutions revised down its 2020 and 2021 current account deficit forecasts to 6.3% of GDP and 4.7%, respectively, from 4.0% and 4.1% as it expects the decline in service exports will outweigh the slowdown in goods imports.

(Source: Fitch Solutions)

• Increased spending to offset the economic and public health impact of Covid-19 and falling revenues amid a deep recession will increase Guatemala’s budget deficit well above historical averages.
• Fitch Solutions revised its 2020 budget deficit forecast to 5.2% of GDP, from 3.8% previously and the 2021 forecast from 3.6% to 4.8% amid accelerated expenditure growth and the government’s 2021 budget that proposes a slow narrowing of the deficit.
• The debt to GDP forecast for 2020 has also been revised to 33.33%, from 27.3%, due to the sharply larger fiscal deficit.

(Source: Fitch Solutions)

• The global economy appears to be recovering from the coronavirus slump faster than thought only a few months ago thanks to improving outlooks for China and the United States, the OECD said on Wednesday.
• The world economy is on course to contract 4.5% this year, the Organization for Economic Cooperation and Development said, which - though unprecedented in recent history - was up from the 6% contraction that it forecasted in June.
• Provided the virus is kept from spreading out of control, the global economy will bounce back into growth next year by expanding 5%. This expectation was trimmed from a June forecast of 5.2%, the Paris-based policy forum said.

(Source: Reuters

• Fitch Solutions anticipates that a Joe Biden presidency would take a more measured, multilateral approach towards confronting China and attempt to enlist democratic allies and parties whose interests align with the US in this respect. 
• Biden would likely find building a counter-China ‘coalition’ a difficult process, given the economic clout Beijing wields in Asia, and he would be forced to consider an issue-by-issue approach to make it more palatable for Asian states to support his agenda.
• The agency also expects greater US economic engagement with Asian nations should Biden become president, and believe that he would begin negotiations for the US to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, in a bid to reduce China’s economic influence over the region.
• Meanwhile, it sees two scenarios for US policy towards Asia for a second Trump term, depending on whether Trump becomes status quo-oriented or continues to implement more dramatic changes to US foreign policy as part of his legacy.

(Source: Fitch Solutions)

• A dispassionate assessment of Jamaica’s foreign exchange (FX) market at this time, in the context of a global pandemic, tells a story of both bad and good news.
• The major bad news is that as a direct result of the COVID-19 pandemic, tourism inflows, Jamaica’s biggest sources of foreign exchange earnings, remain practically at a standstill.
• BOJ’s current estimates of the value of the drastic fallout in FX inflows for the 2020/21FY in a best-case scenario is US$800Mn, and in a worst-case scenario is US$1.40Bn.
• In contrast, the good news is that in several ways, including but not limited to direct sales intervention, BOJ has, since March this year, acted decisively to implement an assortment of measures, all designed to supply extra FX liquidity to the financial system, even though the system is not short of FX liquidity.
• The health of the financial system, the robust level of remittance inflows, the vigorous volumes present in the market, and the strength of BOJ’s foreign reserves, all combine to indicate clearly that the economy at this time has more than enough FX at its disposal to safely navigate the rough waters of this crisis.

(Source: BOJ)

• Mexico’s current account will swing into surplus in 2020 for the first time in decades, as exports outpace imports and remittances continue to surprise to the upside.
• Fitch Solutions forecasts Mexico’s current account surplus will stand at 0.8% of GDP in 2020, up from -0.3% in 2019, before returning to a deficit of -1.3% in 2021 as import demand recovers.
• There are a number of risks to Mexico’s external account stability, particularly if re-openings in the global economy are reversed or if uncertainty over Mexico’s outlook drives capital outflows.

(Source: Fitch Solutions)

• Fitch Solutions expects Brazil's current account deficit will widen heading into 2021, as rebounding economic activity drives a sharp rise in imports.
• The agency forecasts a current account deficit of 1.0% of GDP in 2020 and 1.9% in 2021, which is narrow relative to the average 2.5% deficit of 2018-19.
• Capital inflows will most likely pick up as risk appetite returns to global markets, which should cover Brazil's external financing needs.

(Source: Fitch Solutions)

• Oil rose as data showed China’s economic recovery from the coronavirus crisis is gathering strength, offsetting a bleak assessment of demand by another top energy organization. Futures gained 1.2% with below-average trading volumes in New York.
• Chinese retail sales rose for the first time this year in August while industrial production expanded by a higher-than-expected 5.6%. The data drove European equities and U.S. stock futures higher.
• The International Energy Agency was the latest bearish voice on oil demand, following pessimistic calls this week from BP Plc (British Petroleum), Trafigura Group, and the OPEC cartel. The market outlook has grown “even more fragile” with a resurgence of the pandemic, the IEA said Tuesday.

(Source: Bloomberg)

• U.S import prices increased more than expected in August and gains in the prior month were revised sharply higher, supporting views that inflation pressures were building up.
• The Labour Department said on Tuesday import prices rose 0.9% last month. Data for July was revised higher to show import prices accelerating 1.2% instead of 0.7% as previously reported.
• Economists polled by Reuters had forecast import prices, which exclude tariffs, increasing 0.5% in August. In the 12 months through August, import prices fell 1.4% after declining by 2.8% in July.

(Source: Reuters)