The global Covid-19 pandemic will hit the Caribbean region hard in the coming months, as the tourism industry grinds to a halt and domestic activity contracts given restrictions on travel and commerce.
Fitch has sharply revised down its 2020 real GDP growth forecasts across the region, using historical benchmarks such as the Global Financial Crisis and major hurricanes to estimate the likely impact.
While it is expected the region will begin to recover in late H220 as the coronavirus is contained globally, risks to this view are high, potentially pushing a recovery into 2021.
A structural drop in crude oil prices and economic uncertainty in Guyana will keep its current account balance in deficit in the near term, which will be financed by robust capital inflows.
In the medium-to-long term, surging crude oil production will turn Guyana’s current account balance to surplus, even as increasing real GDP growth sustains high demand for imports.
Fitch expects Guyana's current account deficit will narrow to 20.3% of GDP in 2020, from an estimated 32.1% shortfall in 2019, though weak energy prices will cap export growth.
The global economy is expected to shrink by 3.0% during 2020 in a stunning coronavirus-driven collapse of activity that will mark the steepest downturn since the Great Depression of the 1930s, the International Monetary Fund said on Tuesday.
The IMF, in its 2020 World Economic Outlook, predicted a partial rebound in 2021, with the world economy growing at a 5.8% rate, but said its forecasts were marked by “extreme uncertainty” and that outcomes could be far worse, depending on the course of the pandemic.
A longer pandemic that lasts through the third quarter could cause a further 3% contraction in 2020 and a slower recovery in 2021, due to the “scarring” effects of bankruptcies and prolonged unemployment.
Oil prices edged lower on Tuesday, with investors apparently unconvinced that record supply cuts could soon balance markets pummeled by the coronavirus pandemic, though a predicted plunge in U.S. shale output provided some support.
Brent futures fell 52 cents, or 1.6%, to $31.12 per barrel after settling up 0.8% on Monday. U.S. West Texas Intermediate crude was down $1.06, or 4.7%, to trade at $21.38 per barrel, having dropped 1.5% in the previous session.
The Organization of the Petroleum Exporting Countries (OPEC), along with Russia and other producing countries - a grouping known as OPEC+ - agreed over Easter to cut output by 9.7 million barrels per day (bpd) in May and June, equating to about 10% of global supply before the coronavirus outbreak.
Jamaica’s fiscal surplus will decline over the coming quarters as the government’s economic stimulus response (approximately 1.1% of GDP) to the coronavirus pandemic reduces revenue intakes and increases expenditures.
A sharp contraction in real GDP growth in 2020, driven by public health restrictions on economic activity, will further undermine revenues.
In addition, it is expected that the government’s proposed reduction of the general consumption tax (GCT) from 16.5% to 15.0% and a one-time tax credit to small and medium-sized enterprises (SMEs) will provide additional drag on revenue intakes.
Notably, the economic effects of the coronavirus pandemic will slow the pace of Jamaica’s debt drawdown and like force legislators to seek an exemption from Jamaica’s fiscal responsibility law, which mandates that debt as a percent of GDP falls below 60.0% by March 2026.
President of the Jamaica Promotions Corporation (JAMPRO), Diane Edwards, says Jamaica’s agriculture sector will be key to the country’s recovery from the coronavirus (COVID 19) pandemic.
She told JIS News that the large acreages of land currently under production, as well as the linkages with other sectors, present a number of opportunities for Jamaican entrepreneurs to exploit. She noted that increasing production to supply the demand for Jamaican produce would position the country to recover quickly.
“We have supply lines, we have markets that have already been identified and, in fact, in most of the overseas markets we have seen that we are not producing enough to fulfil them,” Ms. Edwards said.
“So I think in the short-term there are some extraordinary measures that we are going to have to take, but if we take them, I think we can see agribusiness return to a pretty robust and even expanded level of production,” she added.
The company is asking holders of the DIFL 8.75% Sr Secured due 2024 to consent to an increase of secured debt at DIFL (the most senior part of the capital structure) by up to US$100Mn and to change the required leverage ratios to accommodate the higher secured debt.
DIFL is required to maintain a secured debt leverage below 3x; it was 2x at the end of 2019 but with the issuance of new secured debt at that entity as proposed by the exchange offer, the leverage would surpass 3x, breaching the covenant.
There seems to be opposition from holders of the '24s to this change as those holders only get less asset coverage as more secured debt is added onto DIFL.
Asset, loan and deposit growth will decelerate rapidly in Mexico in the coming months, as economic growth and financial markets are hit hard by the global Covid-19 pandemic.
While support from the Banco de México will help prevent a major banking crisis, risks to the view are slanted to the downside.
Despite the near-term headwinds, Fitch maintains its constructive long-term outlook on the sector, given Mexico’s economic upside and relatively low levels of banking sector penetration
The number of Americans seeking unemployment benefits in the last three weeks likely totalled a staggering 15 million as tough measures to control the novel coronavirus outbreak abruptly ground the country to halt, which would cement views the economy was in deep recession.
Thursday’s weekly jobless claims report from the Labor Department, the most timely data on the economy’s health, would strengthen economists’ expectations of job losses of up to 20 million in April.
The government reported last Friday that the economy purged 701,000 jobs in March. That was the most job losses since the Great Recession and ended the longest employment boom in U.S. history that started in late 2010.
Oil prices rose on Thursday on expectations the world’s largest oil producers would agree to cut production at a meeting later in the day as the industry grapples with a coronavirus-driven collapse in global oil demand.
Brent crude LCOc1 futures rose 1.2%, or 41 cents, to $33.25 a barrel as of 0529 GMT. The contract rose to an intra-day high of $33.90, climbing for a second day. U.S. West Texas Intermediate (WTI) crude CLc1 futures were up 3.3%, or 82 cents, at $25.91 a barrel, after earlier climbing by as much as 6.1%.
The Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia - a group known as OPEC+ - are set to convene a video conference meeting on Thursday.
The meeting is expected to be more successful than their gathering in March, where they failed to agree to extend supply cuts and triggered a price war between Saudi Arabia and Russia.
