The Lastest Macroeconomic News
20.02.2016 12:12 Russians tighten their belts for a great cause
This week, Russia and Saudi Arabia agreed to freeze oil production at current levels in an attempt to halt the collapse in oil prices, which have pulled the Russian economy down with them. But the announcement did not give oil prices the bump that the Kremlin hoped for: the freeze is contingent on Iran and Iraq doing the same, which the former, fresh out of its sanctions prison, has very little incentive to do. And without oil prices rising, and doing so dramatically, there will be no end to Russia`s economic crisis. As oil prices more than quadrupled in the first decade of Vladimir Putin`s rule, his spending ticked up along with it, although there was no investment in the kind of structural changes that could have assured Russia`s long-term economic health and resilience. By August 2012, when the federal budget was pegged to oil at $100 a barrel, the ministry of economic development calculated that the country would be in crisis should oil fall to $80 per barrel. Today, that price would be the answer to Mr Putin`s prayers. So what happens now to the lavish social spending that the Kremlin has overpromised on? And what about the expensive military gambit in Syria?
19.02.2016 16:31 1C-start: the economic crisis in Russia is a reason to start a business
Recent news of the economy similar to reports from the war zone. Russia`s GDP fell by 3.7% in 2015; industrial production fell by 3.4%. Investment and retail sales hit even harder - a drop compared to the previous year was 8.4% and 10.0%, respectively. Real incomes have fallen to 10.0%. However, experts say that now is the time to start a business, despite the worsening economic conditions. In particular, this opinion is shared by experts of the company 1C-Start, which is well known for its online service registration documents for the state registration of LLC and SP. Recently, on its portal, the company published a series of e-book "Start Your Business".
17.02.2016 21:50 Russian trade hit by sanctions and commodity crisis
Russia`s trade with the EU`s eastern states fell by almost a third in 2015, as sanctions over Crimea and the economic impact of plummeting commodity prices further unravel the fraying links between Moscow and its former Soviet bloc allies. Exports to Russia from the six countries for which full data are available were worth И5.9bn less in 2015 than 2014. Sales of goods from Lithuania, Latvia, Estonia, Poland, the Czech Republic and Bulgaria declined an average of 30 per cent last year, with similar falls in the first 11 months of the year in Slovakia and Hungary. Russia banned the import of European food products in response to sanctions after the annexation of Crimea in 2014. The downturn in trade has been exacerbated by a recession in Russia, as well as falling oil prices which have reduced the value of its energy exports.
15.02.2016 11:16 Misery and luxury go hand in hand in Russia
We all know Russians have dark and tortured souls - just look at their literature - but another scale of unhappiness called the `misery index` relates levels of inflation and unemployment to the amount of social and economic pain those indicators inflict. At the moment, according to Bloomberg, Russia is the fourth most miserable country in the world, surpassed only by Turkey (3), Argentina (2) and in the unfortunate position of first place, Egypt. The index shows Russia has the second-highest inflation rate at 13 percent, one point behind Argentina, and an unemployment rate of 6 percent. Government statistics say real wages have dropped by about 9 percent. And grumbles are growing. Protesters in the southern city of Rostov-on-Don took to the streets last weekend using humor to get their point across. In a parody of the support shown to those killed at Charlie Hebdo they carried signs saying "Je suis Ruble." Others read "Indecent behavior by the ruble: How low you have fallen!" and "Get up, it`s time to catch up with Africa." Perhaps the most poignant read "The ruble hasn`t fallen, only slipped. On a piece of salo" - a type of cheap salty cured pork fat which might now almost be considered a delicacy as buying power diminishes.
13.02.2016 18:24 Four key problems for Russia`s economy to overcome
Debate about the need for structural reforms has intensified in Russia. But what should they be directed at? At the Foreigners Life conference in Moscow from Feb. 5-7, leading Russian economists identified four main problems with the Russian economy. 1. The population is becoming impoverished faster than before. Compared to the recent crises in the Russian economy, the population is getting poorer much faster this time. By year-end 2015, the amount of goods purchased by Russians had decreased by 10 percent. Even during the most serious crisis in modern history of the country Ц in 1998 Ц this figure (final consumption of households) fell by only 5 percent, and by 4 percent after the global financial crisis in 2009. There is also another reason why the population is running out of money. Businesses are deliberately reducing wages in order to increase their own profits. In 2015, nominal wages grew by 4.6 percent, while company profits increased by an average of 49 percent. One of the reasons for this is the lack of effective trade unions to defend the rights of workers in Russia.
11.02.2016 22:53 Can latest government strategy lift the Russian economy?
Signs for the Russian economy at the beginning of 2016 are not looking good. According to a variety of indicators, the crisis has deepened. The GDP fell by 3.7 percent in 2015, retail trade declined by 10 percent and investment shrank by 8.4 percent. In an attempt to keep the economy afloat, the government has now asked all the ministries to reduce their spending. The reductions will total around 0.9 percent of GDP and will help maintain the budget deficit below 3 percent. However, after the cost of Brent crude fell in January to $30 a barrel (which may lead to further slowdowns in Russia`s oil-dependent economy), the government decided to develop a special anti-crisis plan. Unlike last year, the government is trying to help the real sectors of the economy without going through the banking structures. If in 2009 and 2014 the government directed anti-crisis resources through the capitalization of banks and the stimulation of loans, then the plan now is to issue various types of grants and government contracts. This means that the enterprises will receive money directly, bypassing credit institutions, and it will be the government that decides who will be the recipients of the precious billions. But could there be another way of helping Russia to climb out of financial trouble?
09.02.2016 14:18 How Low Can The Russian Ruble Go?
The European sanctions and sharp fall in crude oil prices have weighed on the Russian economy. I have remained bearish on the Russian Ruble since the beginning of 2015. Recently, the Russian Ruble touched a low of 83.63 against the U.S. dollar as Brent crude oil prices fell below $30 a barrel. Oil prices are projected to touch as low as $20 a barrel. So where is the Ruble heading?
07.02.2016 16:35 Citi: World economy seems trapped in death spiral
The global economy seems trapped in a "death spiral" that could lead to further weakness in oil prices, recession and a serious equity bear market, Citi strategists have warned. Some analysts - including those at Citi - have turned bearish on the world economy this year, following an equity rout in January and weaker economic data out of China and the U.S. "The world appears to be trapped in a circular reference death spiral," Citi strategists led by Jonathan Stubbs said in a report on Thursday. "Stronger U.S. dollar, weaker oil/commodity prices, weaker world trade/petrodollar liquidity, weaker EM (and global growth)... and repeat. Ad infinitum, this would lead to Oilmageddon, a `significant and synchronized` global recession and a proper modern-day equity bear market." Stubbs said that macro strategists at Citi forecast that the dollar would weaken in 2016 and that oil prices were likely bottoming, potentially providing some light at the end of the tunnel. "The death spiral is in nobody`s interest. Rational behavior, most likely, will prevail," he said in the report. Crude oil prices have tumbled by around 70 percent since the middle of 2014, during which time the U.S. dollar has risen by around 20 percent against a basket of currencies. The world economy grew by 3.1 percent in 2015 and is projected to accelerate to expand by 3.4 percent in 2016 and 3.6 percent in 2017, according to the International Monetary Fund. The forecast reflects expectations of gradual improvement in countries currently in economic distress, notably Brazil, Russia and some in the Middle East. By contrast, Citi forecasts the world economy will grow by only 2.7 percent in 2016 having cut its outlook last month.
04.02.2016 16:09 Recession in Russian economy to continue - Bank of Russia
Recession in the Russian economy will continue, the Bank of Russia said. "Industrial production statistics for December 2015 shows that production decline continues on the whole across main kinds of economic activity. This evidences concerns that the decline in the Russian economy will last longer than assumed earlier. The primary reason is the decline in oil prices in the coming months," the regulator said. "Macrostatistic data received in the late month confirms the assumption we made in January regarding higher probability of continued recession in the first half of 2016," the Bank of Russia said. According to the Central Bank, Russia`s budget deficit amid $35 per barrel oil price will grow to 4.8% of GDP. "Implementation of base case forecasted scenario [implying average oil price in 2016 at $35 per barrel - TASS results in lost federal budget revenues versus 1.45 trillion rubles outlined by the legislation and raises deficit from 3% to 4.8% of GDP," the report said. Also, targeting deficit of 3% of GDP without raising debt burden necessitates a respective spending reduction by almost 9% of 16.1 trillion rubles outlined by the legislation, the report said.
02.02.2016 18:34 Sorry Haters, Russia Survives $30 Oil
Russia`s economy has adjusted relatively well to lower oil prices thanks in large part to the ruble, which has tracked oil`s fortunes since 2014. But if oil falls below $30 for an extended period, then all bets are off and Russia`s economy will be in for a prolonged recession. The investment research arm of Sberbank, Russia`s largest lender, warned that if oil does average under a $30 per barrel, then Russia`s budget deficit easily widens to around 3.5 trillion to 3.9 trillion rubles, or around $48.7 billion. Government expenditures are budgeted at around 16 trillion rubles. In a sub-30 oil scenario, the Russian government will be forced to cut its budget by 10% in order to reduce the deficit, according to Sberbank CIB. Russia`s federal government remains highly solvent. The country is run by a bend-don`t-break mentality in the economic policy centers. Western sanctions have helped prolong a recession. Oil just made it worse. Last year, Russian government accounts declined by around 900 billion rubles. But the Finance Ministry held 250 billion rubles on deposits with banks as of January 1, as well as some more cash not spent in 2015. Investors have told FORBES that lifting of sanctions on Russian energy and finance will be a boon for sentiment, but won`t translate into economic growth overnight.