• X-Fund reported a net profit of $181.61Mn for its first quarter ended March 31, 2022, up from the net loss of $203.20Mn recorded in the corresponding period in 2021. However, 138 Student Living (138SL) reported a 7.0% year over year decline in net profit for the first half of its financial year. 
• X-Fund’s positive net earnings were driven by an increase in hotel revenues, amidst the relaxation of local and international travel restrictions. There were higher occupancy levels and increased bookings for corporate and individual events during the first quarter. Notably, the improvement in hotel revenues for Q1 2022 was a 17% increase over pre-pandemic levels. 
• Similarly, 138SL’s average occupancy levels also increased by 5% to 56% supporting a 10.4% increase in revenues in Q1 and 9.3% in H1. However, a 58.0% increase in finance costs, due to renegotiations in its long-term liabilities, influenced the decline in net profit. 
• We expect that X-Fund will continue to see an earnings recovery in the coming months supported by greater tourist arrivals as business travel gains momentum, which will buttress its hotel revenues.  This outlook is supported by a survey by USA Travel Association which indicated that 77% of business travelers and 64% of employed Americans agreed that is important to return to business trips. On the other hand, 138SL’s occupancy levels may remain significantly below pre-pandemic levels as tertiary institutions continue to administer online classes, which may affect short-term profitability if costs are not contained. 
• X-Fund has witnessed a 2.2% depreciation in its stock price year-to-date, while 138SL has seen a 2.2% increase. X-Fund and 138SL currently trade at P/Es of 24.4x and 8.5x, which are above and below the Main Market Real Estate Sector Average of 12.6x, respectively.

(Source: Company Financials and NCBCM Research)

• Minister for Economic Affairs Michael Halkitis said there will be no new taxes in the upcoming budget as it would be “counterproductive” to economic recovery. 
• Halkitis warned that despite the latest International Monetary Fund’s Article IV Consultation report advocating for more taxes calls for such an increase in taxes would not be in the cards due to the ongoing economic recovery from the COVID-19 economic fallout. This view is also shared by the Prime Minister who stated that adding new taxes would be “an absolute last resort.” 
• Instead, the Bahamas is currently focused on trying to grow the economy into recovery, attracting investment, and doing a better job of tax administration through the new revenue enhancement unit. By attracting investment and growing the economy, the country should see an increase in employment, which in turn increases revenue collected by the government. 
• The fund also advocated for a gradual increase of the VAT rate to the regional average of 15%; and the construction of comprehensive real estate price indices on all islands that would provide a basis for a market-value-based property tax. The latter could be made progressive by increasing the rate on higher value residences. 
• However, Halkitis said any implementation of such a tax would be a “major departure” from what historically has been done in The Bahamas and would have to be done after long periods of consultations with the stakeholders, bearing in mind that the threshold is for companies with $750m in turnover.

(Source: The Tribune)

• On Monday, May 9, 2022, Guyana signed an air services agreement with the Kingdom of Saudi Arabia to promote and facilitate the expansion of international air services opportunities between the two countries. The agreement addressed matters pertaining to Grant of Rights; Designation and Revocation; User Charges; Recognition of Certificates and Licences; Tariffs; Commercial Opportunities; Fair Competition, and Environmental Protection, among other matters. 
• Guyana and Saudi Arabia established formal diplomatic relations on February 22, 2012, and presently, there is no direct flight between Guyana and Saudi Arabia; however, this Agreement puts in place the legal framework that opens market access for airlines to operate and enhance competitive air transport services, trade, and economic growth between the two countries. 
• Consequently, Minister Edghill explained that “through the signature of the Guyana-Saudi Arabia Air Services Agreement, we anticipate that it will serve as impetus for Saudia, the national airline of Saudi Arabia to explore air services to Guyana, Latin America and the Caribbean since the airline does not have a presence in this region of the world.” 
• The signing of this agreement is in keeping with the government’s commitment to connecting Guyana with the rest of the world and complements the more than 50 Air Services agreements Guyana has established with the other ICAO States (International Civil Aviation Organization is a specialized agency of the United Nations) for the development of the air link among States.

(Source: Kaieteur News)

• U.S. Treasury Secretary Janet Yellen said that she believes the Federal Reserve can bring down inflation without causing a recession because of a strong U.S. job market and household balance sheets, low debt costs, and a strong banking sector. 
• Yellen told a U.S. House of Representatives Financial Services Committee hearing on Thursday that "all of those things suggest that the Fed has a path to bring down inflation without causing a recession, and I know it will be their objective to try to accomplish that." 
• She said during the hearing on the Financial Stability Oversight Council's work that inflation was the "No.1 economic issue" facing the nation and the Biden administration. 
• "It's having a substantial adverse impact on many vulnerable households and we are laser-focused on addressing inflation," Yellen said, repeating the Biden administration's initiatives to hold down gasoline prices through large releases of crude oil from the Strategic Petroleum Reserve and efforts to unblock congested U.S. ports. 
• There are various factors fueling inflation, including spikes in energy prices due to Russia's invasion of Ukraine and continued pandemic-driven supply chain problems.

(Source: Reuters)

• A closely watched transportation report on Thursday said "the prospect of freight recession is now considerable" as the spending shift from goods to services accelerates, inflation erodes disposable income and interest rates climb. 
• Freight transportation is viewed as a barometer for the U.S. economy because when goods purchases fall, trucks and trains carry less cargo, and business activity slows. 
• "After a nearly two-year cycle of surging freight volumes, the freight cycle has downshifted with a thud," authors of the Cass Freight Index wrote in their April report. 
• U.S. freight volumes fell in April from March and the same period a year ago, according to the report produced by data company Cass Information Systems Inc. that is closely followed by analysts and investors. 
• The shipments component of the index fell 0.5% year over year in April, following a 0.6% year-on-year increase in March. 
• The April shipments component dropped 2.6% from March, and was 0.9% below the normal seasonal pattern. 
• "With more difficult comparisons in the next few months as global supply chain disruptions set to intensify, more softness is on the horizon," the report said.

(Source: Reuters)

• Fitch Solutions expects that elevated global commodity prices will fuel high inflation in Jamaica in the coming months, raising the risk of public unrest. At the end of 2021, inflation in Jamaica was already trending up, averaging 7.9% y-o-y in Q421; however, the Russian invasion of Ukraine  has caused a sharp increase in commodity prices, which has exacerbated the inflationary pressures facing the country. 
• It is forecasted that inflation will average 11.4% in 2022, after headline inflation rose 11.3% y-o-y in March, with food, electricity and transport prices rising 14.7%, 9.6% and 14.3%, respectively. 
• Rising inflation has led Fitch to revise Jamaica’s score for the Short-Term Political Risk Index (STPRI), to reflect the higher risk of instability in the months ahead. 
• Persistently high fuel, food and electricity prices will raise the prospect of protests in the coming months, particularly from organized civil society groups such as transportation and agricultural unions. As a result, it  has reduced Jamaica’s score in the ‘social stability’ sub-component of its STPRI to 45.0 out of 100 from 55.0 previously. This has brought down the country’s overall STPRI score to 69.2 out of 100, from 71.7 previously, putting it basically inline with the Caribbean average of 69.3.

(Source: Fitch Solutions)

• Jamaica’s real GDP is expected to grow 3.9% in 2022 according to Fitch Solutions. This is down from its previous forecast of 4.2%, as elevated inflation constrains private consumption and the tourism sector is impacted by weaker growth in source markets.  
• In 2021 real GDP growth came in at 4.6%, above Fitch’s estimate of 4.1%, as a recovery in the tourism sector drove stronger-than-expected 6.7% y-o-y growth in Q421. In 2022, Fitch expects that tourism will continue to drive the post-pandemic recovery; however, the sector’s rebound will be constrained by weaker growth in key source markets in the months ahead. 
• Additionally, high inflation in Jamaica will depress demand for consumer goods as households spend more on basic necessities like food, gasoline and electricity. While favourable base effects will keep growth above its 2015-19 average of 1.4%, Fitch’s new forecast implies real GDP will not return to pre-pandemic levels until 2023.

(Source: Fitch Solutions)

• The Dominican Republic’s fiscal deficit is expected to be reduced from 2.7% to 2.3% of the gross GDP during the period 2021-2026. 
• However, the country needs more fiscal space for health services, social safety nets, public investments, the accumulation of reserves against natural disasters and to ensure a descending debt trajectory. Consequently, the World Bank plans to invest US$1.8Bn in development projects. 
• Notably, on the heels of the COVID-19 pandemic, the Dominican Republic Government created an economic and social aid plan to help the population cope with the economic crisis that was aggravated by the war between Russia and Ukraine. 
• The set of measures aimed at reducing the impact on citizens’ out-of-pocket spending has consumed more than 11.0 billion pesos in the first four months of 2022. Considering that 15.0Bn pesos was spent in all of 2021 according to the Ministry of Economy, Planning and Development (MEPyD), the spend for 2022 is on track to be higher. 
• Despite the variation in the pace of public spending, the Minister of Economy, Ceara Hatton, has stated that the development of the budget execution has been satisfactory and that the fiscal balance continues to be positive.

(Source: Dominican Today)

• The International Monetary Fund says the country’s recovery is “strong” with real GDP growth pegged at 8% this year.
• The fund, in its Article IV Consultation Report for The Bahamas, said: “The Bahamas is experiencing a tourism-led rebound. The economy expanded by almost 14% in 2021, as net tourism receipts tripled relative to 2020. The strong recovery is expected to continue in 2022, with real GDP growth projected at 8%. The war in Ukraine, which adds considerable uncertainty to the outlook, is expected to affect The Bahamas primarily through higher commodity prices.” 
• The fund also said that, despite the phenomenal growth, it would take until 2024 before the country would be able to return to the pre-pandemic levels of GDP of 2019. “The economy contracted by almost 24% in 2020, as tourism receipts fell by more than 75%. Starting in the second half of 2021, air arrivals saw a steep rebound, recovering to half of 2019 levels 2021, while cruise arrivals, which were initially more subdued, have recently picked up.” 
• Coupled with a rebound in construction activity, output expanded by around 14% in 2021. Labour market conditions are improving, but remain challenging, with unemployment estimated at around 18% at the end of 2021 compared to over 25% in 2020. 
• However, risks are skewed downwards given a difficult near-term financing situation, rising inflationary — and potentially BOP (balance of payments) — pressures because of the war in Ukraine, an ongoing threat from the evolving pandemic, and the country’s high vulnerability to natural disasters. Additionally, the pandemic will likely exacerbate The Bahamas’ long-standing record of low growth. Staff projects medium-term potential growth at just 1.5%, owing to the slow structural reform implementation, including in the energy sector.

(Source: The Tribune)

• Eurozone government bond yields rose on Wednesday after data showing a bigger-than-expected rise in inflation last month in the United States. 
• Data showing U.S. annual inflation rose 8.3% in April, down from 8.5% a month earlier, but above analyst expectations for an 8.1% rise, triggered a wave of selling in bonds. 
• Germany's 10-year Bond yield was last up 1.5 basis points on the day at 1.018%, having fallen just below 1%, its lowest level in almost a week earlier. 
• "I think it is natural to see yields rising after a strong core CPI like we had," said Peter McCallum, rates strategist at Mizuho. But capping the yields rally is a 75 basis point hike from the Federal Reserve, which seems out of sight at this point, McCallum added. "I think there's enough that the market can look at in that report to not necessarily price too much more hawkishness from the Fed," he said. 
• Earlier in the session, yields across the currency bloc fell to their lowest levels in almost a week, with investors taking comfort from signs that any tightening in European Central Bank monetary policy will be gradual. 
• The ECB is likely to end its bond-buying stimulus programme early in the third quarter, followed by a rate hike that could come just "a few weeks" later, ECB President Christine Lagarde said.

(Source: Reuters)