• The Bahamas’ low pre-COVID economic growth coincided with bank credit to the private sector contracting by the equivalent of 20 percentage points of GDP.
• Moody’s, in its full annual report on The Bahamas sovereign, said; “Credit to the private sector has been on a long-term declining trend for years, with credit to the private sector falling to around 45% of GDP by year-end 2019 from around 65% in 2010, although this figure climbed back to 58% in 2020.”
• On the other hand, “The IMF attributes the contraction in credit to more stringent lending standards, a low-growth environment keeping demand for credit low and a conservative lending stance from banks.”
• Moody’s asserted that the country will face the same structural obstacles to growth that have remained unaddressed for decades. “The low growth rate reflects a variety of factors, including competitiveness issues, infrastructure constraints, household debt overhang resulting in low credit growth, chronically high unemployment and sluggish tourism.”
• Structural bottlenecks have prevented The Bahamas from diversifying its economy away from tourism (which comprised over 40% of GDP in 2019), and include issues related to global competitiveness and high energy costs. Infrastructure bottlenecks also limit growth.
• However, “The Government continues to pursue a number of initiatives to improve competitiveness, including the continued digitisation of public services and processes, as well as reforming the corporate insolvency regime to support improvements in the business environment,” the rating agency added.

(Source: The Tribune

• Over a third of the UK's hospitality sector is at risk of going bust early next year due to soaring energy costs, rises in the cost of goods, and falling consumer spending, according to a survey published on Monday.
• The survey by UKHospitality, the British Beer and Pub Association, and the British Institute of Innkeeping and Hospitality Ulster, showed that 35% of respondents were expecting to be operating at a loss or to be unviable by the end of this year.
• It found that 77% of operators are seeing a decrease in people eating and drinking out, 85% expect this situation to worsen, and 89% are either not confident or are pessimistic that the current levels of support offered by the government will protect the industry.
• UK consumers have been reining in their spending with inflation hitting 10% and they also face the prospect of a tighter squeeze in 2023 after finance minister Jeremy Hunt said he would scrap tax cuts previously planned by former prime minister Liz Truss and scaled back her vast energy support scheme for households.
• Hospitality represents 10% of UK employment, 6% of businesses, and 5% of Gross Domestic Product (GDP), according to UKHospitality. The trade associations said continued uncertainty about rising inflation, future regulation, and staffing is causing a crisis of confidence among business owners.

(Source: Reuters)

• Oil prices fell on Monday on expectations that U.S. production could rise and as weaker economic data out of China and the country's widening COVID-19 curbs weighed on demand.
• Global benchmark Brent crude futures dropped 94 cents, or 0.98%, to $94.83 a barrel. U.S. West Texas Intermediate (WTI) crude fell $1.37 to $86.53 a barrel, a 1.6% loss. Both benchmarks notched their first monthly gains since May.
• Oil output in the United States climbed to nearly 12 million barrels per day in August, the highest since the onset of the COVID-19 pandemic, monthly government data showed.
• Meanwhile, factory activity in China, the world's largest crude importer, fell unexpectedly in October, an official survey showed on Monday, weighed down by softening global demand and strict COVID-19 restrictions that hit production.
• Strict COVID-19 curbs in China have hit economic and business activity, curtailing oil demand. China's crude oil imports for the first three quarters of the year fell 4.3% year on year for the first annual decline for the period since at least 2014.

(Source: Reuters)

• Mayberry Investment Limited (MIL) recorded a net profit attributable to shareholders of $2.04Bn (+157.2%) for the nine months ending September 30, 2022. 
• This performance was attributable mainly to growth in unrealized gains on investments in associates, which increased by $3.51Bn or 618.5%, dividend income which was higher by 57.9% or $171.62Mn, and consulting fees and commissions, which grew by 22% to $363.53Mn.
• While the performance year to date is positive, supported by strong performance in the first half of the year, there was a net loss recorded in Q3 owing to the slowdown in the local equities market which resulted in $2.30Bn in unrealized losses on financial instruments and investments in associates.
• The company maintains a robust capital base compliant with regulatory benchmarks. Its Q3 2022 capital-to-risk-weighted asset ratio was 20.8% which is well above the minimum of 10% set by the Financial Services Commission (FSC).
• Going forward, MIL will likely continue to record unrealized losses in Q4 as high interest and tight JMD liquidity cause a pullback in the stock market. This could put downward pressure on MIL’s profitability.
• MIL’s stock price has decreased by 1.81% since the start of the calendar year. The stock closed Thursday’s trading session at $7.70 and currently trades at a P/E of 2.8x, below the Main Market Financial Sector Average of 12.8x.

(Sources: Company Financials and NCBCM Research)

• Tourism is leading the way as the Barbados economy continues its recovery from the COVID-19 pandemic. Central Bank Governor Cleviston Haynes reported in his third-quarter economic review that the economy grew by 10.1% in the first nine months of this year, including 9.8% growth between July and September alone.
• The forecast is for the economy to grow by 10% this year overall, followed by growth between 3.5% and 5% in 2023. However, Haynes said that predicted slower global economic activity amid the tightening of financial conditions in advanced economies was a threat to Barbados’ prospects.
• The Governor said that while the economy was not yet producing at pre-pandemic levels, “based on encouraging forward bookings, tourism is expected to sustain its rebound for the remainder of the year”.
• Importantly, visitor arrivals “continue to be dominated by the traditional source markets, with the United Kingdom leading the way, accounting for 40% of total arrivals and 71% of 2019 levels”. This outpaced the recovery from the United States and Canada which had arrivals of 56% and 49% of 2019 levels, respectively, for the nine months, he noted.
• Haynes said that as Barbados’ economic recovery continues, the government needed to continue its reforms, particularly of state-owned enterprises. “These reforms are intended to improve the quality of service while reducing the burden on the public finances and freeing up resources for needed infrastructural developments and improved resilience to climatic events,” he said.
• Most notably, better service quality in the public sector should also contribute to the overall enhancements in productivity and competitiveness in the private sector.

(Source: Nation News)

• Fitch Solutions forecasts that the Dominican Republic’s current account deficit will widen to 4.1% of GDP in 2022, down from its previous forecast of 4.4%, as tourism arrivals and spending are surprised to the upside. Throughout the year to August, total foreign tourist arrivals have grown a robust 66.9% y-o-y, with stronger-than-expected inflows of French and Spanish tourists underlying this trend.
• However, economic slowdowns in key source markets, particularly the US, will slow tourism growth, goods exports, and remittances inflows, further widening the current account deficit to 4.3% of GDP in 2023.
• Inflationary pressures and tightening financial conditions will cause US growth to slow from 1.8% in 2022 to 0.3% in 2023. Furthermore, given that the US imported 55.3% of all Dominican goods in 2021, dominated by consumer electronics, tobacco products, and medical devices, easing demand from the US will cause Dominican goods export growth to slow to 3.4% next year.
• That said, import growth will also decelerate next year, to 3.0%, as prices for raw materials and gasoline moderate, limiting the growth of the goods trade deficit. Similarly, service export growth will ease to 1.9% in 2023, primarily due to weakening tourism demand from the US, Canada, and the Eurozone markets as global growth slows.
• After solid growth in 2020 and 2021, Fitch expects the contraction in remittances in 2022 will continue in 2023, underpinning a 0.9% decline in the secondary income account surplus to USD9.6Bn, from USD9.7Bn this year.
• If the US economy continues to experience persistent inflationary pressures, the US Federal Reserve may decide further tighten the interest rates beyond the current expectations of 4.50% by end-2022. This would likely cause a further weakening of growth in 2023, which would in turn weigh more heavily on Dominican export growth and remittance inflows than currently expected, resulting in a wider current account deficit.

(Source: Fitch Solutions)

• Europe slashed its gas use in August and September as industries cut production in response to soaring prices and scarce Russian supply, although the cuts were unevenly spread between countries.
• Overall gas use in the 27-nation European Union plunged by 14% in August compared with the five-year average for the month, and by 15% in September, according to the latest data from the EU statistics office Eurostat.
• With little call on gas-fuelled heating over the summer, the curbs were delivered by industry and, in some cases, the electricity sector as gas prices hit record highs, driven by Russia's move to cut supplies to Europe following its invasion of Ukraine.
• "That is really industries shutting down or significantly reducing their gas use," said Simone Tagliapietra, a senior fellow at think-tank Bruegel, adding that the lasting impact of such closures on Europe's industrial base was not yet clear.

(Source: Reuters)

• The return of British International Investment (BII) to the region will offer a vital new source of finance for countries. BII is the United Kingdom’s development finance institution. It assists in solving challenges in developing and emerging economies by investing flexible capital to support private-sector growth and innovation.
• Addressing the launch of the BII on Tuesday (October 25), at the British High Commission in Kingston, Minister of Finance and the Public Service, Dr. the Hon. Nigel Clarke, welcomed the return of the BII to the region, after an absence of more than 20 years.
• He stated that it opens the avenue for more investments that can help to improve standards of living in Jamaica and can help to transform the lived experience of the Jamaican citizen. It will prioritise investments in the private sector, particularly small and medium-sized enterprises (SMEs), with a focus on sustainable and scalable projects.
• Clarke noted, also, that significant investments will be needed to reduce Jamaica’s dependence on imported commodities, thereby strengthening Jamaica’s resilience against economic shocks from external factors.
• The Minister for the Americas and Overseas Territories, The Rt. Hon. Jesse Norman said the BII is a key part of the UK government’s global plans to mobilise up to £8 billion a year of public and private-sector investments by 2025. This will include BII partnering with capital markets, leveraging the city of London and other funds, to scale up financing for private-sector development.
• BII will also help to usher in a new wave of investments in clean and green infrastructure [and digital transformation], and make investments that bolster financial institutions and businesses, create jobs, and boost trade.

(Source: JIS)

• Fitch Solutions has revised its 2022 and 2023 forecasts for real GDP growth in Guyana to 56.1% and 18.7%. This is from 46.0% and 8.0% previously, as oil production has ramped up more rapidly than initially anticipated which, combined with a higher oil price environment, will sustain more robust growth. 
• Robust demand for energy globally and further development and exploration of offshore reserves will sustain exports and investment in the coming quarters. As such, interest in Guyana’s oil sector will remain strong, attracting continued investment.
• Most notably, fueled by the rapidly expanding oil sector, Fitch also expects the non-oil economy will continue to grow as well. Therefore, in the coming years, greater development of the oil sector will sustain more robust non-oil growth, positioning Guyana as a regional outperformer as additional oil projects come online in the coming years.
• The additional projects will expand the sector’s production capacity and further drive export and investment growth, despite a moderating oil price environment. Greater production will also support the labour market and additional government revenue receipts, sustaining higher spending.
• Importantly, while Fitch’s Oil & Gas team expects that oil prices will fall only modestly in 2023, should the global economy slow more rapidly than anticipated, oil prices could fall more than currently anticipated. This would undermine revenue intake for the government, potentially hindering greater spending plans or the expansion of Guyana's non-oil economy.

(Source: Fitch Solutions)

• International Monetary Fund chief Kristalina Georgieva said on Wednesday that central banks should keep raising interest rates further to fight inflation until they hit a "neutral" level, though in most cases they have not reached this point.
• Speaking to Reuters in Berlin a day before the European Central Bank is widely expected to raise rates by 75 basis points, the fund's managing director said it would take until 2024 for the positive effect of central banks raising rates globally to be felt.
• The ECB had for months said that its first step will be to raise rates to a neutral setting, where it was neither driving nor restricting growth, but some policymakers are now advocating more aggressive action, saying the ECB should go further to tame inflationary pressures.
• "At this point, we look for getting to a neutral mode, and in most places, we are not quite yet there," Georgieva said in an interview.
• Central banks have to bring rates up because "when inflation runs high, that undermines growth, it hits the poorest parts of the population the hardest."

(Source: Reuters)