• Years of under-investment in the mining of metals essential to energy transition, supply shocks, and high energy prices will continue to drive commodity prices higher, Eurasian Resources Group (ERG) Chief Executive Benedikt Sobotka said on Wednesday. 
• Combined with COVID-related logistical issues and demand for transparency on sustainability these factors have brought together "all the ingredients for a perfect storm in commodity markets," he told the Reuters Global Markets Forum in Davos. 
• Sobotka said that a commodity super-cycle has now begun and will carry on for the next 30 years, predicting a 20% rise in copper prices by the end of 2022. 
• Sobotka believes a fossil fuel resurgence is temporary, and the transition to a lower-carbon economy "cannot be stopped," which will require a projected $50 trillion in the next three decades. "Anything between $200-$300 billion in investment per year will be required for the mining industry to satisfy demand for the energy transition," he said, with much of this invested into the mining of copper, nickel, cobalt and other metals. 
• In an environment of high prices and supply chain pressures, Sobotka expects companies and countries to stockpile strategic raw materials, including oil, copper, cobalt and other metals. "If you get small supply disruptions, you are going to see big swings in prices," Sobotka said, adding that he expected to see an impact in the second half of 2022.

(Source: Reuters)

• World Bank President David Malpass on Wednesday suggested that Russia's war in Ukraine and its impact on food and energy prices, as well as the availability of fertilizer, could trigger a global recession. 
• Malpass told an event hosted by the U.S. Chamber of Commerce that Germany's economy, the world's fourth largest, has already slowed substantially due to higher energy prices, and said reduced production of fertilizer could worsen conditions elsewhere. 
• "As we look at the global GDP ... it's hard right now to see how we avoid a recession," Malpass said. He gave no specific forecast. 
• He said the economies of Ukraine and Russia were both expected to see a significant contraction, while Europe, China, and the United States were seeing slower growth. 
• Developing countries are also being hit even harder given shortfalls of fertilizer and food stocks and energy supplies. 
• "The idea of energy prices doubling is enough to trigger a recession by itself," he said. 
• The World Bank last month had already cut its global growth forecast for 2022 by nearly a full percentage point, to 3.2% from 4.1%, due to the impacts from Russia's invasion of Ukraine.

(Source: Reuters)

• 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)