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New Price Controls May Mark The End Of Liberalisation In Venezuela Published: 05 May 2020

  • A number of measures announced by the Venezuelan government, including new price controls, suggest that the partial economic liberalisation seen in the country in recent months has come to an end.
  • The new measures, intended to address shortages amid the Covid-19 outbreak, are unlikely to be effective, and reinforce our view that Venezuela will not return to strong long term growth while the current government remains in power.
  • Risks to social stability will likely continue to rise in the weeks ahead, as shortages and a rising Covid-19 case total are likely to weigh heavily on living conditions in the country.

 (Source: Fitch)

Covid-19 To Push Barbados' Budget Balance Into Deficit Published: 05 May 2020

  • Barbados will experience a fiscal deficit in FY2020/21 as the economic impacts of Covid-19 hinder revenue growth and elevate spending.
  • Travel restrictions will reduce revenues, while the government response to the coronavirus pandemic will push expenditures higher.
  • Fitch has revised down its fiscal forecast to a deficit of 1.3% of GDP from a surplus of 2.5% of GDP, with risks weighted to the downside.

 (Source: Fitch)

U.S. Treasury blasts records with $3 trillion borrowing need this quarter Published: 05 May 2020

  • The U.S. Treasury Department on Monday said it plans to borrow nearly $3 trillion in the second quarter of 2020 - more than five times larger than the previous record - as the federal government spends at a frantic pace to mitigate the impact of the coronavirus on the U.S. economy.
  • Monday’s estimate is $3.055 trillion more than the original target for the quarter issued in early February, when it was still unclear whether the coronavirus would spread widely in the United States.
  • At that time, it appeared as though the federal government would pay down $56 billion of debt in the current quarter, leading Treasury to forecast a negative estimate for new net marketable debt in the period.

 (Source: Reuters)

U.S. manufacturing activity plunges to 11-year low as orders sink Published: 05 May 2020

  • U.S manufacturing activity plunged to an 11-year low in April as the novel coronavirus wreaked havoc on supply chains, suggesting the economy was sinking deeper into recession.
  • The survey from the Institute for Supply Management (ISM) on Friday added to a raft of grim data this week, including a collapse in consumer spending in March and a surge to 30.3 million in the number of Americans who have filed claims for unemployment benefits in the last six weeks.
  • The ISM said its index of national factory activity dropped to a reading of 41.5 last month, the lowest level since April 2009, from 49.1 in March. The monthly decline in the ISM index was the biggest since October 2008. A reading below 50 indicates contraction in the manufacturing sector, which accounts for 11% of the U.S. economy.

 (Source: Reuters)

Restoration Of Jobs Lost High On Agenda Of Economic Recovery Task Force Published: 01 May 2020

  • Minister of Finance and the Public Service, Dr. the Hon. Nigel Clarke, says the newly established COVID-19 Economic Recovery Task Force will be working assiduously to ensure the restoration of jobs lost as a result of the coronavirus (COVID-19) pandemic.
  • The Minister said layoffs and job losses have occurred in a number of sectors and subsectors. These include tourism and attractions, the airline industry, entertainment, manufacturing, retail, security, entertainment, early childhood, and private education services.
  • Of note, Dr. Clarke said data from the SET Cash applications suggest that more than 75 per cent of the applicants are under age 40, pointing out that these are “persons who are starting out in life [and] have obligations”.
  • The Minister described this scenario as “very painful”, particularly in light of the significant level of job creation and reduction in unemployment occurring in recent years.

 (Source: JIS)

First Supplementary Estimates To Be Tabled Within Two Weeks Published: 01 May 2020

  • Minister of Finance and the Public Service, Dr. the Hon. Nigel Clarke, says the first Supplementary Estimates for 2020/21 should be tabled in the House of Representatives within two weeks.
  • “That supplementary budget will recast [projected] revenues in light of the [coronavirus] COVID-19 pandemic… it will involve a reallocation of expenditure to be consistent with the realities that we face at this time… and will ensure that the expenditure we intend to enact for the COVID Allocation of Resources for Employees (CARE) Programme, goes to the Houses of Parliament,” Dr. Clarke said.
  • The Government’s initial Budget of $852.7 billion was adjusted to $853.5 billion to reflect an additional $792 million to fund the operations of the Petroleum Corporation of Jamaica (PCJ), which is being integrated into the Ministry of Science, Energy and Technology.

(Source: JIS)

Fitch Affirms El Salvador 'B-' IDR; Outlook Revised to Negative Published: 01 May 2020

  • Fitch Ratings has affirmed El Salvador's Long-Term Foreign- Currency Issuer Default Rating (IDR) at 'B-' and revises the Outlook to Negative from Stable.
  • The Negative Rating Outlook reflects deterioration in debt sustainability metrics as a result of the widening of the fiscal deficit and economic contraction as well as financing constraints stemming from increased reliance on short-term debt, limited scope for additional local market financing and uncertain access to external market financing given high borrowing costs. However, multilateral funding can help ease borrowing constraints this year.
  • The rating agency projects a deep economic contraction of 4.8% in 2020 due to the extended national quarantine to combat the coronavirus pandemic as well as 20% fall expected in remittances, representing nearly 20% of GDP,that will hit domestic demand sharply. However, its expects a strong rebound of 5% in 2021 but risks are to the downside in both 2020-2021.

(Source: Fitch)

Robust Growth In Guyana Makes It An Outlier In The Region Published: 01 May 2020

  • Fitch expects real GDP growth in Guyana will surge in 2020 as crude oil production and increased investment outweigh the downside growth pressures from the Covid-19 pandemic.
  • That said, low global energy prices, sustained investor risk aversion and domestic political uncertainty will likely weigh on foreign investment in Guyana and may cap its economic potential.
  • Fitch maintains its 2020 and 2021 real GDP growth forecasts of 20.8% y-o-y and 17.4% respectively, up from an estimated 4.7% expansion in 2019. 

 (Source: Fitch)

Oil rises towards $27 as OPEC+ begins record cut Published: 01 May 2020

  • Oil rose towards $27 a barrel on Friday as OPEC and its allies began a record output cut to tackle a supply glut weighing on the market due to the coronavirus crisis.
  • Output cuts of 9.7 million barrels per day by the Organization of Petroleum Exporting Countries, Russia and other producers, known as OPEC+, began on Friday. Even so, there are doubts the reduction, the largest ever agreed, will be enough.
  • Brent LCOc1 for July rose 37 cents, or 1.4%, to $26.85 by 1205 GMT. U.S. crude CLc1 for June added 83 cents, or 4.4%, to $19.67. Both benchmarks rallied sharply on Thursday. Brent rose 12% and U.S. crude gained 25%.

(Source: Reuters)

U.S. Fed balance sheet increases to record $6.7 trillion Published: 01 May 2020

  • The Federal Reserve’s balance sheet increased to a record $6.7 trillion this week as the central bank used its nearly unlimited buying power to soak up assets to keep markets functioning amid an abrupt economic free fall due to the coronavirus pandemic.
  • It is now the equivalent of roughly 31% of the size of the U.S. economy before the crisis struck, and will certainly grow larger in the weeks ahead as the Fed keeps piling on assets and the economy shrinks.

(Source: Reuters)