Higher oil prices will hurt Barbados, The Bahamas, and Jamaica, which rely on fuel imports primarily for electricity generation and transport.

We estimate that oil imports will increase between 1.6% and 3.8% of GDP in those 3 Caribbean countries.

The good news is that tourism is also recovering because of the relaxation of Covid-19 related restrictions.

However, there are downside risks related to the increase in oil prices and the conflict in Ukraine, which could affect international tourism.

We expect Jamaica's economy to grow 4.8% in 2022 thanks to the recovery of international tourism.

The primary fiscal surplus will increase to 6.1% of GDP in FY 2022/23 according to our estimations, while the overall fiscal deficit would narrow to 0.4% of GDP.

With such a solid economic performance, the country would decrease its debt to the lowest level in 20 years by the end of FY2022/2023 (93.2% of GDP).

Although we believe that the debate about it will intensify, we do not expect Jamaica to become a republic this year.

SELL: Currently high cash prices and mostly negative liquidity and solvency indicators make...

The Planning Institute of Jamaica (PIOJ) estimates that the economy grew 6.3% in the 3Q21, mainly driven by the recovery of tourism.

Tourist arrivals rose 282.8% during 3Q21, however, the volume of visitors represented only 69.5% of pre-pandemic levels.

The economic recovery in Jamaica has been slower than in the Dominican Republic but faster than in Barbados.

We estimate that the country's economy will not recover its pre-pandemic levels until the end of 2023.

SELL:  Jamaica's risk/reward is not attractive at current prices while credit indicators remain negative. 

Jamaica's yield is not attractive given its weak fundamentals. The country is the lowest yielding “B” issuer (Bloomberg Composite ratings). 

We compare Jamaica's macro fundamental to the Dominican Republic and find the former worst in most indicators.

Jamaica has better fiscal results but the stock of debt exceeds GDP.

SELL: we don’t think that JAMAN 28 has further room to compress and the yield is not attractive for the medium-to-long term in a relative-value analysis. 

The Jamaican economy grew by 12.9% YoY in 2Q21 and 2.3% YoY in 1H21.

The services industry led the recovery and grew by 14% YoY in 2Q21 due to rebounded tourists arrivals

Tourist arrivals to Jamaica stood on average at 34.5% of pre-pandemic levels in 2Q21

Considering the 2Q21 results and the new restrictions, we modified our growth forecast for 2021 from 1.1% to 3.4%

All forecasters expect a hurricane season above normal.

NOAA estimate that there will be 13 to 20 named storms, of which 6 to 10 could become hurricanes, including 3 to 5 major hurricanes.

We generally believe that the tourism outlook is positive, as the current levels of tourist arrivals are much higher than those observed in 3Q20.

Under high uncertainty, we maintain our growth forecasts and believe that these could be adjusted upward given the higher-than-expected tourism recovery.

The economic impact of natural disasters adds a new wrinkle to the assessment of BAHAMA, BARBAD, and JAMAN bonds. Of those three, howe...

Among our sample of countries, The Bahamas showed the worst fiscal results in the pre-pandemic period

We estimate that Jamaica will improve its fiscal performance by registering a fiscal balance of -0.6% of GDP during FY 2021/2022 (from -3.6% in FY2020/2021).

Barbados would show a slight improvement in the primary deficit from -1% of GDP to -0.5% but would maintain the same level of fiscal deficit (5% of GDP)

The Bahamas will register a fiscal balance of -10.2% of GDP during FY 2021/2022 (from -13.5% of GDP in FY2020/2021)

We reaffirm our ratings for the bonds of The Bahamas (BUY), Barbados (HOLD), and Jamaica (SELL...

In 2020, Barbados’ economy fell -18%, Bahamas’ -16.3% and Jamaica’s -9.9%.

The Bahamas had the worst performance in our group with a decrease in exports of goods and services of -65.3%.

The Caribbean countries have an advantage because their main sources of tourists are advanced economies that will likely complete their vaccination programs in the 3Q21.

However, we believe that the Caribbean countries will experience a rebound of international tourism as of 4Q21 due to their slow vaccination process.

HOLD: The improved outlook for tourism in 2022 should open up opportunities in The Bahamas’ c...

The economic recovery program will inject USD 410 mn (2.9% of GDP) into the economy.

We project that the primary surplus will be 5.3%, 0.8 p.p. lower than the government’s forecast.

We expect a slow economic growth recovery (4.4% vs. 5.2% expected by the government) due to the lack of major fiscal stimulus.

We estimate that the debt will decrease from 112.9% to 108.5% of GDP in the FY2021/2022

SELL: In our view, Jamaica is trading significantly rich, and it would not come as a surprise to us if the curve gradually shifted upwards.

Emerging markets faced massive capital flight as a result of the COVID-19 crisis.

However, there has been debate as to whether the severe initial shock was primarily the result of an interruption in liquidity flows and not the deterioration of macroeconomic variables.

Growth in emerging economies may have taken a permanent hit but, at the same time, emerging markets could become more attractive to those hunting for yield.

We believe that the deepness of the impact of the pandemic on EMs can be quantified.

As the economy plunged, a second supplementary budget was approved to address COVID-19 related social programs and capital expenditures (0.7% of GDP).

We estimate that the GOJ has a financing gap of USD 1.6 bn. Until September, it has managed to cover USD 322 mn (20.0%), mainly through domestic debt (USD 283 mn).

If the multilateral loans agreed with the IMF, WB and IDB (USD 740mn) are disbursed, the GOJ would cover 65.8% of its financing needs until March 2021.

We maintain our SELL for Jamaica, since we believe that now the risk/reward on the credit is not attractive.

We take a comprehensive look at political risk indicators in a group of Emerging Market countries, trying to identify potential sources of conflict.

We analyze the electoral scenarios in the four Latin American nations that will have electoral processes during the end of 2020 and all of 2021.

We review the scenarios in the parliamentarians of Argentina and El Salvador, we comment on the electoral process that will take place in Venezuela, and we review the perspectives of the presidential elections in Ecuador.

We evaluated the World Bank’s governance indicators for our sample countries in 2019 and share our view of thes...

Scholarly research shows that domestic debt grew as a share of total debt in EMs during the first decade of the century, but defaults on domestic creditors still decreased significantly.

A default to domestic investors usually carries a higher political and economic cost than a default to foreign investors.

Domestic debt is usually concentrated in local financial institutions, such as banks, insurance companies and pension funds.

The Dominican Republic has far more room for maneuver in fiscal terms than Jamaica.

Once the fiscal responsibility argument is taken out of the equation, we believe JAMAN’s yields should adjust accordingly to its lower rating.

In a 1-year horizon, our base scenario considers DOMREP’s curve remaining around current levels, while JAMAN experiences a significant widening.

We find the DOMREP 6.4 2049’s low price/high yield mix attractive.

We also think JAMAN 8 2039 trades too rich and its current yield does not reflect the deterioration in debt and fiscal metrics to come.

Statin’s figures show that the economy contracted 18.4% y-o-y in the second quarter of 2020 (2Q20), after a 2.3% declined in the 1Q20.

A worsened outlook led the Finance Ministry to adjust its GDP contraction estimates from the previous -5.1% to the current -7.9%.

We expect an 8.9% GDP contraction in 2020 and a partial recovery of 3.9% next year and 3.1% in 2022, but the economy is not expected to return to pre-COVID-19 levels before 2023.

We maintain our SELL for Jamaica, as we don’t find the risk/reward on the credit attractive, especially relative to its peers.

Jamaica’s yield curve mostly overlaps the Dominican Republic, yielding between 2% and 4% in the short-end and around 6% in the long-end.

A comparison shows that Dominican Republic has better figures than Jamaica in all categories but in one: political indicators.

Despite market confidence, we see Jamaica as much more vulnerable to external shocks and its fiscal adjustment still has a long way to go.

SELL: Both our solvency and liquidity indicators are flashing red, and we expect further deterioration in the medium term.

The incumbent JPL got a landslide victory in yesterday’s elections, winning 49 out of 63 seats in the parliament.

Fears surrounding recent spike in COVID-19 cases affected the turnout.

Holness’ reelection is good news. Over the last six years the Jamaican authorities have been implementing fiscal consolidation measures.

We see risk of policy reversal that could delay or even partially reverse the fiscal consolidation achieved in the past years.

Jamaica has been one of the most notable recent successes of IMF-sponsored adjustment of the past few years.

Nonetheless, sustainedly-low GDP growth rates, high unemployment, and increased economic malaise due to COVID-19 could tempt the government to a looser fiscal stance.

One possible catalyst for a reversion to a loose fiscal policy could be a change of government on the September 3 elections.

Nonetheless, even if the incumbent wins reelection, we still think there is a risk that he would ease policy after years of restraint.

We find this credit unattractive, mostly because the yields in the 4%-5% range are very...

In 1Q20, the most affected activity was restaurants and hotels, which declined 14.1% yoy.

The 22.3% yoy contraction in exports was offset by a 19% decline in imports, which resulted in an improved trade deficit of USD 982 mn in 1Q20 (from a USD 1.2 bn).

In April, remittance inflows stood at USD 181.8 mn, a decrease of 9.8% (USD 20 mn) compare to April 2019.

The reopening of the economy has not caused a significant increase in COVID 19 cases and the pandemic seems to be under control.

We held our macroeconomic forecasts unchanged, with a GDP contraction of 5.3% and a current account deficit of 9.6% of GDP in 2020.

Given deflationary trend signaled by recent months’ prints, we could expect the BOJ to hold the rate steady

The BOJ expects inflation to close the current year at 3.8% and the FY 2020/21 at 4.5%.

At EMFI securities we project that inflation will decelerate to 2.7% at the end of the year, while we expect a depreciation of the FX rate of 1.9% and that it will close the year at JMD 136.8/USD.

Overall, Jamaica is 5.1% down from the beginning of the year, which means it has retraced almost all of March’s losses.

Low interest rates and the hunt for yields of the last decade has left broad swaths of EMs overindebted and vulnerable.

The first half of 2020 is not yet over and we already have 3 countries in default.

The recent record of most defaults on Eurobonds on a single year was 4 in 2017, so 2020 is not far from setting new records.

Eurobond restructuring processes are usually among the most complicated due to the variety of holders and the different interests they represent.

Suriname, Zambia, Belize, Sri Lanka and Angola are in the most risk to engross the default-statistic for the year.

May was one of those months that feels like a year. We had a default in Argentina, a tense election in Suriname, a deadly pandemic still spreading around the world, and yet, it was a good month for emerging market debt

Our EMFI Core Index went up for the first time in 6 months. The biggest winners were Argentina, Angola and Ecuador, while Venezuela, Suriname and Sri Lanka were among the negative outliers that went against the general risk-on mood

The macro and fiscal situations deteriorated further for all countries covered, and we chronicled the dramatic economic crash in our Country Reports

We’ve been preparing fo...

We adjusted our GDP growth forecast from  April's -4.6%  to -5.3%

We expect that the strong fall in revenues and the stimulus package, will significantly deteriorate fiscal figures from a primary surplus of 7% in 2019/20 to 2.7% of GDP in 2020/21.

We expect the Debt-to-GDP ratio to close the FY 2020/21 at 99.6% from 93.9%.

This year will deteriorate the fiscal balance, but the subsequent return to the fiscal consolidation path brings opportunities in the USD-denominated bonds.

As of May 22, 8 countries have at least one USD-denominated sovereign bond trading below 50 cents on the dollar.

The Covid-19 crisis could lead to a new wave of sovereign defaults from prolonged confinements.

We discuss the worst debt restructuring events so far this century.

Argentina 2005 remains at the forefront of these events if we exclude the exceptional cases of countries at war or leaving them.

The countries with the most compromised solvencies that could generate problems with their debt are Angola and somewhat behind, Sri Lanka, El Salvador, Egypt and Pakistan.

A pandemic year was on the cards, the dramatic magnitude of its effects was not.

The global economy is expected to shrink by 3% in 2020, but leading indicators are pointing to a deeper downturn.

Emerging countries with a history of volatile economic growth will show the worst results.

Some economies may experience a period of above-trend growth during the recovery, although the level of GDP will remain, in most cases, below the pre-virus level.

Pakistan is the weakest among the EMFI Countries, in terms of the spread of the virus. Lebanon, Sri Lanka and Barbados are the strongest, with a controlled increase rate and a persistent lockdown.

The countries that we evaluate with the worst economic performance year-to-date are Angola, Venezuela, Lebanon, Barbados, El Salvador, Ecuador, Sri Lanka, Argentina and Suriname.

Since the end of 2019, the local currency has depreciated -70.5% in Venezuela, -52.4% in Lebanon, -43.5% in Argentina and -40% in Suriname.

El Salvador and Argentina launched the most ambitious fiscal program among our sample, which will cost 6% and 5.6...

The safest rung of EM hard-currency sovereign bonds fell on March but has already retraced all their losses.

Mid-quality EMs plunged over March and have risen somehow since, but haven’t fully recovered.

This segment has seen a 320 bps rise in average yield in 2020, going from an average 6.1% yield to 9.3%.

We believe high-yield bonds in our mid-quality group have significant upside if they avert a credit event.

After a dry March, markets are again open for fresh bonds, but only from relatively high-quality issuers.

US stocks rose 12.7% in April, while US investment grade bonds rose 4.6% and EM bonds 4.0%.

Our EMFI Core Index fell 0.9% over the month and is 27.1% down YTD.

The best performers of April were Egypt (+4.7%), Sri Lanka (+4.0%) and Turkey (+3.8%).

The worst performers were Suriname (-26.9%), Lebanon (-14.0%) and El Salvador (-11.3%).

The IMF has approved just over USD 16.0 bn for 61 countries.

Of the 16 countries we follow, 6 have already been granted financing for a combined USD 3.5 bn.

Lebanon and Argentina presented restructuring proposals asking for large debt relief but not offering much adjustment.<...

On April 15, the G20 agreed on a standstill for bilateral debt service during 2020. Nonetheless, the agreement only applies to IDA-eligible countries. The suspension will be NPV-neutral and will involve repayment over 4 years, including a 1-year grace period.

Multilaterals haven’t found a way to implement a similar standstill. In fact, Fitch Ratings warned them that joining in on the G20 standstill could result in rating downgrades if not appropriately compensated by shareholder countries.

On aggregate, official creditors account for almost 90% of the debt of low-income, and 60% of that of lower middle-income countries, b...

Travel exports accounted for 53.4% of total good and services exports in 2018 and for 59.1% in the first half of 2019 (latest figure available). World tourism activity is now expected to fall between 20%-30% in 2020.

Jamaica exports alumina and bauxite account for 54.4% of good exports and 15.6% of total exports will be affected by the drop in alumina price plunge since mid-March.

We adjusted our GDP forecast from our March estimate of -0.7% to current -4.6%, mainly explained by the negative impact of the contraction of external demand of tourism services.

Economic measures will have adverse implications for budgetary out...

Two weeks ago, we singled out some early calls for a generalized global debt moratorium in our Global Strategy Viewpoint: Force Majeure. The idea has gained significant traction and is becoming one of the main themes in economic and financial discussion.

While we don’t think a generalized moratorium on commercial bonded debt is likely to succeed, investors should be aware that it is a growing theme and bondholders will probably be under increased pressure to accept attempts at restructuring bond terms.

There are some indications that China is a significant roadblock for the IMF-World Bank initiative for a bilateral debt m...

The COVID-19 crisis is raising a difficult question of public policy for emerging market economies with low fiscal space, which have to reconcile economic and social policy with debt service.

The relation between liquidity and solvency problems is not straight-forward: the COVID-19 shock, which presents liquidity challenges first and foremost, can unearth underlying solvency problems and can also turn liquidity problems into solvency ones if improperly managed.

We’re already seeing some early calls for an international debt holiday to exempt countries from paying during the COVID-19 crisis. Multilateral organizations are ...

Despite this negative outlook, Jamaica has the fiscal and external buffers to face the coming crisis.

Jamaica’s government is currently undergoing the 2020 budget debate in the House of Representative, which was opened by the Minister of Finance on March 10 and will end on March 24.

Jamaica’s Finance Minister Nigel Clarke presented to the House of Representatives a JMD 25 bn (USD 183 mn or 1.2% of GDP) fiscal stimulus package to cushion the impact of the virus.

In total, the expected cost of the tax-reduction measures, effective April 1, will amount to JMD 18 bn in 2020/21.

So far, the government has sum...

The current crisis will translate into twin demand and supply shocks, with an oil price war on top of it.

The demand shock driven by declines in the world’s main trading partners will particularly affect emerging markets which are characterized by low diversification of exports and production.

Supply chains around the world have been disrupted by factory closures, first in China and now in Europe and the US.

The markets most exposed to a potential slowdown are the major commodity exporters: Venezuela, Ecuador, Angola and the markets most reliant on Chinese and US tourism.

In most EMFI countries the tourism act...

Our EMFI Core Index has fallen 27.6% year-to-date (YTD), while Our EMFI Expanded Index has fallen 19.2%. The last two weeks have been particularly bad, with consecutive 10% declines.

Unsurprisingly, countries heavily reliant on oil have suffered the most. Among our 34-country group, almost every oil-reliant one has fallen more than the 18.3% median.

The second thing that jumps to the eye is that the riskier countries have fared proportionally worse than relatively safer countries, when excluding oil-dependent countries.

We’re also seeing several countries crossing the 10% yield threshold, usually associated with dis...

The outbreak of the Coronavirus, as well as the “oil price war” between Saudi Arabia and Russia have triggered almost complete certainty that a global recession is coming over the next quarter.

Some economists are expecting a 2-quarter rolling recession, but there is potential for the downturn to extend further if the virus reemerges after activity is unfrozen.

Emerging market debt is taking a beating in 2020 so far. The countries we cover registered a median 14.3% fall year-to-date, with the worst performer doing as bad as 60.3% down (Ecuador) and 38.5% down (Angola).

We compare indicators on 4 major categori...

February was a bad month for EM debt, as the market went into risk-off mode pushing bonds to backtrack on the gains made over the previous two months. 11 out of the 15 countries in our EMFI Core Index fell on the month, while the weighted index itself fell 5.8%, retracing below December levels.

Our Expanded Index ex. Core confirms February’s sell-off, registering declines in 21 out of 25 countries and an aggregated fall of 0.9%. Nonetheless, this fall is significantly below that of our EMFI Core Index.

Our selection of countries is clearly biased towards some large and risky high-yielders, which translates to an expectabl...

Jamaica successfully concluded a program with the International Monetary Fund (IMF) in November 2019

Over the last six years the Jamaican authorities have been implementing fiscal consolidation measures that allowed the country to reinstate fiscal sustainability.

Debt to GDP has fell from a historic high of about 147% of GDP in 2013 to 91% in 2019.

In 2019, Central Government’s operations recorded a fiscal surplus of JMD 29.3 bn (1.4% of GDP), 0.1 pp above the surplus of JMD 26.6 bn (1.3% of GDP) of 2018

The financing needs for Central Government was 7.8% of GDP in 2019, reflecting the 1.4% of GDP fiscal surpl...

The Jamaican dollar began to show a considerable depreciation in the last month, going from 129.2 JMD / USD on June 19, to 135.1 JMD / USD on July 17. With this increase, the local currency accumulates a depreciation of 5.1% so far in 2019. To curb the rise in the exchange rate, the Central Bank of Jamaica (BOJ) intervened in the foreign exchange market on July 12 with a offer of USD 30 million through authorized dealers through its Intervention and Foreign Currency Trading Tool (B-FXITT). But the exchange rate did not show a significant recovery.

The Statistical Institute of Jamaica (STATIN) reported that Jamaica's economy grew by 1.7% during the first quarter of 2019 (1Q19) compared to the same period of 2018.

However, the seasonally-adjusted GDP figure compared to the previous quarter (4T18) showed a decreased of 0.4%. This decrease was mainly driven by the fall in the production of goods (-0.9%) and in the service industries (-0.2%).

The STATIN also released the inflation results for May. Monthly inflation stood at 0.8%, while year-on-year inflation reached 4.8%. This figure is in line with the 2019 inflation target, which ranges from 4% to 6%.

Tahseen Sayed, Country Director of the World Bank for the Caribbean countries, recently said that a positive change in the Caribbean's fiscal policy is evident. "The historical narrative has been one of low growth, high debt, the change that is happening is that growth is still low, but it is not depressed, it is not as bad as many of the countries in South America or many other parts of the world. world, "said Sayed.

The director said that Jamaica's debt management is remarkable. He also indicated that Grenada and St. Vincent and the Grenadines have also maintained a downward path of debt.

The Statistical Institute of Jamaica (STATIN) reported that Jamaica's economy grew by 2.0% during the fourth quarter of 2018 compared to the corresponding quarter of 2017. This result was driven mainly by the goods sector whose growth reached 4 , 9%. Among the main industries are: Agriculture, forestry and fishing (3.1%), mining and quarrying (25.0%), manufacturing (2.0%) and construction (3.7%). The agency also noted that agriculture, forestry and the fishing industry were affected by favorable weather conditions that led to higher crop yields.

The Prime Minister, Andrew Holness, says that the economic progress made by Jamaica in recent times can be used as a model to be followed by other countries.

The Prime Minister, who addressed the heads of diplomatic missions at the Jamaica Pegasus hotel in New Kingston on March 13, cited the reduction in the debt / gross domestic product (GDP) ratio, which will fall to 96, among economic achievements. % at the end of fiscal year 2018/19 through March 31.

This represents the lowest level of debt in almost two decades, and the first time it will fall below 100% during that period.

The Standing Finance Committee (CPF) will begin to examine the cost estimates for JDM 803 billion (equivalent to approximately USD 5.9 billion) for fiscal year 2019/2020, next week.

The budget was presented on February 14, in the House of Representatives by the Minister of Finance and Planning, Dr. Nigel Clarke. The budget indicates that the Ministry of Finance and Public Services will receive the largest sum of the same, with JMD 385.6 billion for recurrent expenses and JMD 5.7 billion for capital expenditures. It should be noted that a large part of this amount will be used to meet Jamaica's debt obligations.

For fiscal year 2019/20 (April to March of next year), the Jamaican government presented a budget of JMD 803 billion (approximately USD 5.9 billion). This figure means an increase of 4% with respect to fiscal year 2018/2019. We must mention that this increase is in line with the projected inflation target for 2019, which shows a lower limit of 4% and an upper limit of 6%.

On the revenue side, the total figure reaches JMD 665 billion (USD 4895 million). It is estimated that total tax revenues will increase by USD 421 million from USD 3,808 million last year to USD 4,258 million this year.

The difference between income and expens...

Jamaica is one of the few Caricom countries that has maintained a sustained growth in the last five years, and has also managed to steadily decrease its debt / GDP ratio in recent years. This has had a positive effect on its credit reputation, currently it is one of the few Latin American economies with a positive outlook according to the main risk rating agencies.

In reviewing the commercial performance of Jamaica, it is found that the trade balance of the Caribbean country is negative. On December 31, 2018, the Statistical Institute of Jamaica (STATIN) issued a press release for the period January to October 2018. In this release, ...

The Planning Institute of Jamaica (IPJ) reported yesterday, November 28, that the Jamaican economy continued to grow in the second quarter of the fiscal year of 2018 (July-September). The Gross Domestic Product (GDP) of this period showed an increase of 1.9% in real terms, when compared with the same quarter of the previous year. This growth was driven mainly by the production of goods that increased by 5.2%. At the same time, the services sector showed an increase of 0.8%. The growth outlook for Jamaica looks positive.

The general director of planning, Wayne Henry, told the media that real GDP growth for the quarter from October to ...

The Jamaican dollar continues to show considerable appreciation, going from 134.35 JMD / USD in the review of our last report (October 3) to 131.9 JMD / USD yesterday. With this increase, the local currency accumulated an appreciation of 4.9% since it reached its maximum of the year on August 23 when it stood at 138.35 JMD / USD.

At the same time, the Executive Board of the International Monetary Fund (IMF) is expected to ratify Jamaica's fourth review under the Caution Agreement with the IMF (PSBA), when its members meet to deliberate on November 5, due that the Government complied with the seven fiscal macroeconomic structural ...

On July 20th, Moody’s upgraded Jamaica’s credit rating outlook from stable to positive and the macroeconomic outlook for Jamaica continues to improve as the government has been making efforts to reduce debt levels while implementing fiscal reforms that allow for increased tax collection and economic growth. According to the International Monetary Fund (IMF), in 2016 the General government gross debt as percent of GDP stood at 113.9% while in 2017 this ratio improved to 104.1%. The projections for this year continue to be positive; the IMF estimates that Jamaica will close 2018 at 98.3%. Minister of Fina...