The Lastest Macroeconomic News

22.11.2015 13:01 Commodity demand: Past, present, future

Over the past 15 years, China`s impact on global raw material demand has been nothing short of phenomenal. The spectacular growth in commodity demand between 2005 and 2010 led to the term “commodity supercycle”. However, this was no ordinary commodity cycle, as the nation with a population of more than 1 billion people rapidly urbanized. Today, despite the slowdown in commodity demand since 2011, there are still many analysts who have the firm conviction that the world remains in a commodity supercycle and that the globe is currently experiencing a pause before the acceleration in the demand for commodities resumes. Bearing these views in mind, as well as the current impact on global markets being caused by China`s growth slowdown, it is worth taking a moment to review the impact of China`s industrialization and the rapid increase in commodity demand in the past. Equally important is taking stock of current commodity demand fundamentals and looking to the future and China`s likely impact on commodity demand.

20.11.2015 12:31 APEC 2015: Micro enterprises, innovation take center stage

The Asia-Pacific Economic Cooperation (APEC) capped off a year`s worth of focusing on policies to support micro and small to medium enterprises (MSMEs) with a summit designed to tackle some of the current trends that can inspire entrepreneurs. The summit entitled "Innovation and Big Ideas: Pushing boundaries” was held on Nov 16, a day ahead of the center piece meeting to be attended by APEC economy leaders. Promoting MSMEs has been a central feature of the country`s APEC hosting this year, which revolved around the theme of inclusive and sustainable growth. These small businesses, which make up 99.7% of APEC economies, have been identified by the APEC Business Advisory Council (ABAC) as key to tapping into inclusive growth. “Unlocking the remarkable potential of entrepreneurs needs robust innovation ecosystems. MSMEs are oftentimes better poised to understand new customer expectations and create transformational business models through innovation,” said Doris Magsaysay-Ho, 2015 ABAC Chair. The article contains some of the ideas discussed at the summit.

18.11.2015 22:11 Common goals shared by APEC, G20

The Asia Pacific Economic Cooperation (APEC) and the Group of Twenty (G20) are sharing common goals of stable global economic growth and quality and inclusive growth, said Indonesian Vice President Jusuf Kalla. At the APEC CEO Summit 2015 in Makati City on Wednesday, Kalla said strengthening of synergy of policies in both fora would support the recovery and stability of the global economy as well as ensuring the growth to trickle down. Indonesia is member of both APEC and G20. G20 concluded its 2015 Summit in Antalya, Turkey on Monday and was attended by other APEC member economies including Indonesia, Australia, Canada, China, Japan, Mexico, Russia, South Korea, and the United States. The APEC Economic Leaders` Meeting (AELM), on the other hand, started on Wednesday. “The G20 Meeting highlights important priorities: global recovery and strengthening potentials, enhancing alliance and reinforcing sustainability. These priorities are very much in line with the theme of APEC this year which focuses on growth and inclusiveness,” Kalla said.

16.11.2015 18:41 G20: Success or failure?

The fall of Lehman Brothers is one of the most shocking economic events that the West has experienced since the Great Depression that started in 1929. It was the first sign that showed that the so-called global financial crisis (GFC) would spread around the world. U.S. President George W. Bush called for a G20 Leaders Summit to discuss the fault lines that caused the GFC and to agree on measures to fix them. This was a clever maneuver since this was a global crisis and therefore, the problems should be solved in a coordinated and comprehensive manner. Since the early 2000s, emerging economies such as China, Brazil, India, South Africa and Turkey made their presence felt in the global economy. Discussing global economic issues at the G8 platform was no longer accurate and constructive. The G20 is a more appropriate platform to discuss how to reform global finance and economy. So far the G20 has made important progress in reshaping the governance of global finance by implementing macro-prudential policies, developing strict rules on the "too big to fail" problem, increasing the lending capacity of the International Monetary Fund (IMF) and collecting richer information on the shadow banking system. But this progress is not sufficient. There is still much to be done.

13.11.2015 14:32 Russia`s Economy: What Do the Numbers Tell Us?

Before the Bolshevik revolution, Vladimir Lenin supposedly said “the worse the better.” Essentially, what he meant was that the more conditions deteriorated under the Russian czar (and in its aftermath) the more likely the Bolsheviks would obtain power. In this, Lenin was quite prescient. Today, the Russian economy has fallen into a “worse” phase. The collapse in oil prices, coupled with economic sanctions, has significantly impaired economic growth. The question is: How bad is it, and what are the future prospects for recovery? In short, the prospects currently look dismal. Even a rapid and sustained resuscitation in energy prices is unlikely to restore growth to levels experienced earlier this decade. One striking fact is that Russian growth started to decline rapidly in 2012 Q1, well before oil prices fell or economic sanctions took hold. Growth had plunged to approximately one percent before either phenomenon occurred. Russia`s 4 percent GDP growth rate was largely manufactured by enormous growth in consumer credit, which was not sustainable. The World Bank estimates that, by 2017, Russia`s real GDP will be smaller than it was in 2012.

12.11.2015 11:21 World Art Market Booms to Record $54 Billion in 2014

What (arguable) luxury did buyers around the world spend $54 billion on in 2014? Art. The art market in 2014 broke all existing records, according to the annual TEFAF Art Market Report by Art Economics founder Clare McAndrew. The global art market raked in over ˆ51 billion ($53.9 billion U.S.) - an all-time high. Moreover, the annual sales figure has finally surpassed the 2007 pre-recession high of ˆ48 billion ($51 billlon). “The art market reached its highest ever record level of sales with continuing strength in Modern and Post-War and Contemporary art,” she noted. But there is some evidence to indicate that art is something of a hobby of the 1%: “It continues to be a highly polarized market, with a relatively small number of artists, buyers and sellers accounting for a large share of value,” said Ms. McAndrew in a statement. “However, a promising trend counteracting this to some extent is the growth in online sales, which has encouraged a greater volume of sales in lower priced segments,” she concluded. Plus, Ms. McAndrew found that the art market`s impact on the wider global economy was significant: approximately 2.8 million people work for 300,000 companies that buy and sell art and antiques, and ˆ12.9 billion ($13.6 billion U.S.) was spent on support services for those businesses.

11.11.2015 01:33 Russia`s Military Spending to Increase Modestly in 2016

Russia`s defense budget will increase by a modest 0.8 percent in 2016, according to information obtained by TASS. A budget report released by the Defense Committee of the State Duma states that 3.145 trillion rubles ($49 billion) will be allocated for national defense in fiscal year 2016, with a total of 2.233 trillion rubles ($34.8 billion) earmarked for the Russian Armed Forces. If approved, the defense 2016 defense budget will increase by just 25.5 billion rubles ($400 million), around 0.8 percent, over 2015. It will be the first time since 2011 that Russia`s military expenditure has not increased dramatically. In 2015, Russia allocated 3.3 trillion rubles (US $52 billion) for defense. However, due to the deteriorating economic outlook, the defense budget had to be cut by five percent to around 3.1 trillion rubles. This nevertheless still constituted a 25.6 percent increase to 2014, according to IHS.

09.11.2015 18:01 Global trade slowdown points to world recession danger

A slowdown in international trade could be a harbinger of a new recession for the world`s leading economies, a leading global policy organization warned Monday. The Organization for Economic Cooperation and Development says trade figures are worrisome because the stagnating or declining rates of trade seen this year "have, in the past, been associated with global recession." In its world economic outlook issued Monday, the Paris-based group projected global trade growth at 2 percent this year, improving to 3.6 percent next year. In only five years of the past 50 has global trade grown at 2 percent or less, and each time has coincided with a world economic downturn, said Angel Gurria, the OECD`s secretary-general. "Trade should be growing at about double the speed of growth of the world economy because trade is always a locomotive," Gurria said. Instead, the OECD predicted the world economy would grow 2.9 percent this year and 3.3 percent next year.

07.11.2015 13:54 Is a fresh drop in oil prices to hit Russia`s economy?

Oil storage facilities in the U.S. and Europe have tanked up to record levels because of the continued slump in the price of crude. Oversupply may lead to a drop in oil demand and a consequent further decline in crude oil prices, Goldman Sachs analysts recorded in a research report published on October 27. “This raises the spectre of 1998 [and] 2009, when distillate storage hit capacity, pushing runs and crude oil prices sharply lower," warned the analysts at the U.S. investment banking multinational. This would represent a serious threat to the Russian economy. According to a report by CitiGroup, a fall of $10 a barrel in oil prices will lead to a reduction in GDP of 0.8 percent. This is not the first time Goldman Sachs analysts has scared the market with forecasts of falling oil prices, said Georgy Vashchenko, head of Russian stock market operations at the Freedom Finance investment company. "From their recent forecasts, the price could reach $20 a barrel and remain at that level for decades," he said.

04.11.2015 11:34 With the ruble depreciation, `Made in Russia` could once more become a worldwide trademark

Russia`s economy remains in recession, and the country has now experienced one full year of economic decline. Yet there might be some light at the end of the tunnel. Russia`s recession officially began in the fourth quarter of 2014 and then deepened significantly throughout 2015. Growth reached just 0.6 percent in 2014 and the economy is expected to contract by 3.8 percent in 2015. In Russia`s flexible exchange rate regime, the decline in the country`s main exports (oil and gas) immediately results in a weakening ruble. Since oil prices halved in late 2014 to about $60 per barrel, the ruble depreciated in equal measure. This rapid depreciation of the real effective exchange rate (REER) caused a sharp contraction in imports. Russian households and firms simply could not afford anymore to pay for the rising cost of foreign goods and services. Until now, this has led to a deep recession and Russians have had to reduce their consumption, resulting in a much larger group of Russians now living in precarious conditions. However, with a weaker exchange rate new opportunities are starting to emerge. For the first time in decades, “Made in Russia” might have a chance to become again a global trademark. As the weaker ruble created a price advantage for some industries, export volumes started to rise, in turn generating investment in certain sectors. Exports to countries outside the Commonwealth of Independent States increased in the mining, chemical, and machine-building sectors. As a result, Russia`s total export volume grew by 1.7 percent in the first half of 2015. Until now, this was not enough to generate an overall increase in non-energy exports, but this could change in the medium term.

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