• Fitch forecasts that Peru’s current account deficit will narrow to 2.5% of GDP in 2022, from, 2.8% in 2021, due to import demand slowing more rapidly than export demand. After the COVID-19 pandemic yielded Peru’s first current account surplus since 2007 in 2020, due to a sharp fall in imports, a strong economic recovery returned the current account to a deficit in 2021. This comes as pent-up demand and pandemic-era stimulus measures drove domestic demand for foreign goods. 
• In Q1 2022, goods imports grew 19.1% y-o-y in nominal USD terms, as lower borrowing costs and the tailwinds from a strong economic recovery in 2021 supported domestic demand. However, it is expected that real GDP growth in Peru will slow to 2.6% in 2022, from 13.3% in 2021, with private consumption, in particular, easing in the coming months.  
• Goods export growth will slow to 11.1% in 2022, from 47.1% in 2021, pushing the overall trade surplus to USD16.8Bn (6.7% of GDP), from USD14.6Bn (6.6%) in 2021. In Q1 2022, exports grew 23.1% in nominal USD terms, largely driven by strong copper demand. While this data shows promising growth in the first months of 2022, multiple factors will weigh on export growth in the coming months. 
• Peruvian goods exports will be particularly impacted by slowing growth in China, the key export market for Peruvian copper, which makes up 40.0% of total exports from Peru. That said, Chinese real GDP growth will slow to 4.5% in 2022 due to health-related lockdowns, limiting demand for Peruvian copper. Additionally, copper prices will dip in H2 2022, which will further undercut the value of Peru’s exports. 
• Against this background, in the coming quarters, it is expected that the slowdown of the Peruvian economy will limit import demand, resulting in a wider goods trade surplus, narrowing the current account deficit.

(Source: Fitch Solutions)

•  Grenada is welcoming the resumption of Air Canada’s direct service from Toronto. Earlier this year, Air Canada announced the suspension of flights to several Caribbean islands including Grenada citing “current pandemic context,” a reference to the ongoing coronavirus (COVID-19) pandemic, as the reason. 
• Tourism, Civil Aviation, Climate Resilience and the Environment Minister, Clarice Modeste-Curwen, said “The return of Air Canada is welcome news at a time when accessibility and travel convenience are key to attracting international visitors.” Notably, Canadian arrival numbers have remained strong in Grenada, despite the absence of direct service. The country is pacing ahead of 2019 numbers, and group business is up 37%. 
• Canada is recognized as one of the most important tourism generating markets in the world, with 41% of Canadians choosing beach destinations. To that end, Grenada continues to be a firm favourite amongst Canadian travelers with a typical stay of up to ten days on the island. The market has continued to grow over the years and delivers a great return on investment in the tourism industry. 
• This direct connection will ultimately lead to a further increase in the number of Canadians visiting Grenada. In addition, the country recently rescinded its entry protocols, “making it easier for travelers to reach the destination” and contribute to the resumption of the country’s tourism sector. Modeste-Curwen said both vaccinated and unvaccinated travelers arriving in Grenada do not need to take any COVID-19 tests prior to arrival or upon arrival, do not need to fill out a health declaration form prior to arrival or upon arrival, and do not need to quarantine on arrival.

(Source: Caribbean Nation Weekly)

• The World Bank on Tuesday slashed its global growth forecast by nearly a third to 2.9% for 2022, warning that Russia's invasion of Ukraine has compounded the damage from the COVID-19 pandemic, and many countries are now facing recession. 
• The war in Ukraine had magnified the slowdown in the global economy, which was now entering what could become "a protracted period of feeble growth and elevated inflation," the World Bank said in its Global Economic Prospects report, warning that the outlook could still grow worse. 
• In a news conference, World Bank President David Malpass said global growth could fall to 2.1% in 2022 and 1.5% in 2023, driving per capita growth close to zero, if downside risks materialized. Malpass said global growth was being hammered by the war, fresh COVID lockdowns in China, supply-chain disruptions, and the rising risk of stagflation -- a period of weak growth and high inflation last seen in the 1970s. 
• The bank forecast a slump in global growth to 2.9% in 2022 from 5.7% in 2021, a drop of 1.2 percentage points from its January forecast, and said growth was likely to hover near that level in 2023 and 2024. It said global inflation should moderate next year but would likely remain above targets in many economies. Growth in advanced economies was projected to decelerate sharply to 2.6% in 2022 and 2.2% in 2023 after hitting 5.1% in 2021. U.S. growth was seen dropping to 2.5% in 2022, down from 5.7% in 2021, with the Eurozone seeing a growth of 2.5% after 5.4%. 
• Negative spillovers from the war in Ukraine would more than offset any near-term boost reaped by commodity exporters from higher energy prices, with 2022 growth forecasts revised down in nearly 70% of emerging markets and developing economies.

(Source: Reuters)

• The U.S. trade deficit narrowed by the most in nearly 9-1/2 years in April as exports jumped to a record high, putting trade on course to contribute to economic growth this quarter. The sharp decline reported by the Commerce Department on Tuesday reversed March's surge and suggested that trade could be shifting back to a more normal pattern. The deficit widened, hitting successive all-time highs, as the United States' economy led the recovery from the COVID-19 pandemic global downturn. 
• "The deficit has widened on trend over the past two years because the U.S. economy has generally grown faster than most of its major trading partners over that period," said Jay Bryson, chief economist at Wells Fargo in Charlotte, North Carolina. "We look for trade to make a modest positive contribution to overall GDP growth in the second quarter.” 
• The trade deficit dropped 19.1%, the largest decline since December 2012, to $87.1 billion. This is below the expectations of economists polled by Reuters, which had forecast the trade gap shrinking to $89.5 billion. 
• In April, exports of goods and services increased 3.5% to an all-time high of $252.6 billion. The broad increase was led by shipments of industrial supplies and materials, which hit a record high amid rises in exports of natural gas, precious metals, and petroleum products. Exports of services also increased from $2.4Bn to $76.5Bn, lifted by gains in both travel and transport. 
• Imports of goods and services fell 3.4% to $339.7 billion. Imports had been rising rapidly as businesses replenished inventories to meet strong domestic demand. However, with the Federal Reserve raising interest rates to combat inflation, demand is slowing. Inventories of some goods are also close to normal levels, reducing the need for imports. The drop in imports could also be the result of shutdowns in China as it battled new COVID-19 infections. Imports from China fell by $10.1 billion, helping to narrow the goods trade gap with Beijing to $34.9 billion from $43.4 billion in March.

(Source: Reuters)

• Jamaica’s tourism sector is on track for record arrivals this summer, surpassing 2019 levels, when the country had the highest number of visitors ever seen for the summer months. Jamaica welcomed approximately 250,584 visitors in July 2019. 
• “Summer 2022 will be the strongest summer that Jamaica’s tourism has ever seen”, said Minister of Tourism, Hon. Edmund Bartlett.” All the bookings and the indications are that we are going to exceed 2019 levels this summer. 
• These expectations for strong summer arrivals bode well for other sectors as well, such as manufacturing, distribution, agriculture and transportation, which are directly and indirectly linked to tourism. This will ultimately continue to bolster the growth and recovery in financial performance already being experienced by some companies in these sectors. 
• Additionally, from a macro-economic perspective increased tourist arrivals will support the direct and indirect demand for workers and hence support the employment rate and disposable income. Further, the associated increased inflow of foreign currency will also aid in stabilizing the foreign exchange market. 

(Sources: JIS News and NCBCM Research)

• The Bank of Jamaica (BOJ) has been given the authority to issue Central Bank Digital Currency (CBDC) as legal tender locally, with the Senate’s passage of the Bank of Jamaica (Amendment) Act, 2022 at Gordon House on Friday (June 3). 
• Consequent to the legislation’s passage, the way has been paved for the BOJ to proceed with the national rollout of the CBDC – JAM-DEX. The pilot was undertaken between August and December 2021. 
• Full CBDC implementation is expected to significantly reduce traditional challenges associated with many Jamaicans not having a bank account. Ultimately the implementation of the CBDC will improve the level of financial inclusion domestically, and help to improve payment systems. 
• Currently, the National Commercial Bank (NCB) offers JAM-DEX through Lynk, its digital wallet. In this regard, anyone with Lynk will be able to complete transactions with another Lynk wallet holder using JAM-DEX at a date to be advised by NCB.

(Sources: JIS News and NCBCM Research)

• Fitch will be closely monitoring the upcoming May inflation prints from Brazil, Chile, Colombia and Mexico. Notably, commodity prices are expected to remain elevated throughout 2022, as the Russia-Ukraine conflict and the subsequent economic sanctions on Russia continue to disrupt the global supply of fuel and food in particular—the two countries provided 27% of global wheat exports and 14% of global corn exports in 2019. 
• In addition, persistent supply chain issues, exacerbated by COVID-19 lockdowns in China that shutdown ports and stranded freight ships will also contribute to price pressures. That said, the Agency’s global team forecasts that headline inflation growth will peak by end-Q2 2022. 
• Of note Peru’s May inflation print last week showed inflation reached 8.1% YoY, up only modestly from 8.0% YoY in April, possibly signaling that the peak of price growth is approaching. 
• Higher government spending on gasoline subsidies across several markets (including Chile, Colombia and Mexico) will reduce fuel costs for households.

(Source: Fitch Solutions)

• Barbados will be one of the first two Caribbean countries in which a common Central Bank Digital Currency (CBDC) is to be rolled out. The CaribCoin project, as it is being referred to, is a joint venture between Schröder, the Chief System Architect, and the Caribbean-based technology accelerator Abed Ventures. 
• Caribcoin would first be rolled out in Barbados and Jamaica and then other Caribbean countries. However, renowned regional financial and economic expert Marla Dukharan suggested that each country in the region could do well with their own digital currency while adding that there was especially a need for a cross-border settlement system. 
• Pointing to some of the benefits of a digital currency, Schöder said it allowed for faster transactions and was more accessible, safe, sustainable and stable. It also presents an opportunity to create a pan-Caribbean digital money, that can be used across the region. 
• A common CBDC would also deliver seamless, faster and cheap payments, provide liquidity and enable a fast-track towards a CARICOM Single Market & Economy (CSME) without a need to replace national currencies but simultaneously enhance financial inclusion in the region.

(Source: Barbados Today)

• Cleveland Federal Reserve President Loretta Mester said on Friday (June 3rd, 2022) that there is not ample evidence that inflation has peaked and thus is on board with supporting a series of aggressive interest rate increases. 
• While other recent data points have shown that at least the rate of inflation increases has diminished, the policymaker has highlighted the importance of having multiple months of this trend before accurately stating that inflation has already peaked. 
• The recent statements from the rate-setting Federal Open Market Committee indicated that 50 basis point rate increases are likely at the June and July meetings. Officials are then likely to evaluate the progress that the policy tightening and other factors have had on inflation. Mester said any pause in rate hikes was unlikely, although the scope of the hike could be scaled down.

(Source: CNBC)

• China's exports are expected to have expanded at a faster pace in May as factories reopened and supply chain disruptions calmed after Shanghai began to emerge from a lockdown, while imports also likely rose, a Reuters poll showed. 
• The recovery adds to evidence the world's second-largest economy has begun to chart a path out of the supply-side shock that rocked world trade and global markets. However, China's trade outlook faces risks from factors such as high raw material costs, uncertainties from the Ukraine war and as recovering production overseas affects demand for Chinese goods. 
• Shanghai's COVID-19 lockdown, which officially ended on June 1, snarled logistics and regional supply chains but there are signs of a turnaround. Official data showed the average daily container throughput at the Port of Shanghai rose 7% in May from a month earlier. 
• Exports in May likely grew 8.0% from a year earlier, accelerating from a 3.9% expansion in April, according to a median forecast in a Reuters poll of 28 economists. Imports were expected to have risen 2% year-on-year in May, the poll showed, likely driven by imports of raw materials and intermediate goods as domestic production resumed. That compared with flat growth in April. China's trade surplus is likely to have widened to $58Bn from $51.12Bn in April.

(Source: Reuters)