The Lastest Macroeconomic News
07.03.2014 00:09 RPT-Fitch: Crisis to Weigh on Russia Economy
The crisis in the Ukraine has increased the risks to Russia`s already weakening economy presented by currency depreciation and capital flight, Fitch Ratings says. The situation is still highly unpredictable but Russia`s sovereign credit profile is robust and events so far do not have implications for the country`s `BBB` rating. Market reaction to Russia`s intervention in Crimea saw the rouble fall 2.2% to an all-time low against the US dollar on Monday, while the MICEX index of Russian shares fell 10.8% and yields on rouble sovereign debt rose sharply. The Central Bank of Russia (CBR) raised its key interest rate by 150bp to 7%, and intervened to support the rouble, selling USD11bn. Losses were partly recovered on Tuesday as tensions appeared to ease. Higher energy prices and a weaker rouble should provide a fillip to sovereign finances by boosting the local-currency value of oil and gas exports, which contribute around half of federal government revenue and current external receipts. This will keep the fiscal deficit within the target of 0.6% of GDP in the budget, making up for a shortfall in non-oil revenue. But the economic drag through lower business and consumer confidence and a loss of purchasing power will be more significant.
05.03.2014 23:04 Why Europe will balk at Russian sanctions
The deployment of Russian troops in Crimea has drawn condemnation from Washington and Europe, along with talk of potential sanctions if diplomacy fails. The United States has put trade and investment pact talks with Russia on hold, while Secretary of State John Kerry has talked about isolating Moscow through visa bans and freezing assets. But European leaders, who meet Thursday to discuss the crisis, have been more circumspect, instead emphasizing the need for diplomacy and international mediation. That`s hardly surprising when you consider the extent to which the economies of the European Union and Russia are intertwined. With the eurozone still emerging from its own crisis, European leaders will think long and hard about any measures that might put that recovery at risk. Russia is the EU`s third-biggest trading partner after the U.S. and China. Trade in goods totaled a record 336 billion euros ($462 billion) in 2012, more than 10 times the volume between Russia and the U.S. Add in exports of services, and the value of the Russia-EU relationship rises to $520 billion. Russia is the EU`s single-biggest supplier of energy. Oil and gas prices rose sharply Monday on fear of supply disruptions through Ukraine, which account for about half of Russian flows. EU exports, meanwhile, are largely made up of machinery and transport, chemicals, medicines and agricultural products. Nowhere is Europe`s reliance on Russian energy more acute than in Germany.
04.03.2014 00:17 Ukraine crisis: Why it matters to the world economy
The political turmoil is rooted in the country`s strategic economic position. It is an important conduit between Russia and major European markets, as well as a significant exporter of grain. But in the post-Soviet era, it`s a weakened economy. Now, the government is in need of an economic rescue -- and torn between whether Russia or the Western economies (including the European Union) is the savior it needs. Here are five reasons the world`s largest economies are watching what happens in Ukraine. 1. Ukraine is an important tie between Russia and the rest of Europe: Ukraine doesn`t hold the economic power it once did, but it does retain its geography. Russia supplies about 25% of Europe`s gas needs, and half of that is pumped via pipelines running through Ukraine. Moscow has cut off that flow in past disputes with Kiev and a disruption could push up energy prices for businesses and households. 2. Sanctions on Russia: One prospect on the table would be the unusual circumstance of a top-10 global economy placing sanctions on another. But Secretary of State John Kerry said Sunday the U.S. is "absolutely" willing to consider sanctions against Russia. President Obama, he added, "is currently considering all options." 3. European and world trade could be impacted: The impact could be felt beyond Europe if the world`s supply of grain is impacted. Ukraine is one of the world`s top exporters of corn and wheat, and prices could rise even on concern those exports could halt. 4. Ukraine`s government is in debt and needs assistance: The situation arguably would not be so volatile if Ukranian government coffers were more stable or the economy stronger. The country owes $13 billion in debt this year and $16 billion comes due before the end of 2015. Without help, the country appears to be headed for default. 5. Ukraine isn`t the only fragile emerging market: Ukraine`s instability comes at a difficult time for emerging markets worldwide, which are seeing growth slow as the Federal Reserve eases its economic stimulus. The situation in Ukraine could lead investors to reassess the risks of other emerging markets slowing economic growth.
04.03.2014 00:05 Russia Raises Main Rate as Ukraine Crisis Threatens Economy
Russia raised its main interest rate the most since 1998 to shore up the economy as concerns that President Vladimir Putin will invade Ukraine sent the ruble tumbling and sparked the biggest stock selloff in five years. The one-week auction rate, the benchmark introduced in September, was increased temporarily to 7 percent from 5.5 percent, the Bank Rossii said on its website today. The 150 basis-point move was accompanied by similar increases in other major lending rates. Putin gained parliamentary approval to send troops into Ukraine last week after Pro-Russian forces took control of the neighboring country`s Crimea region. European and U.S. leaders have threatened sanctions against Russia, creating risks that economic growth will stall, demand for the country`s assets will dry up and a selloff in the currency will deepen. Foreign reserves fell to a three-year low of $490 billion on Feb. 7, a week after Deputy Economy Minister Andrey Klepach said that capital outflows may reach $35 billion in the first quarter, more than half of the $63 billion that left Russia in all of 2013. The ruble is trading above the last announced level of the central bank`s corridor, raised to 35.40 to 42.40 on Feb. 28, which means that regulator is selling foreign currency and buying rubles without daily limits to slow its depreciation. Yields on government bonds jumped most after the unexpectedly rate increase aimed at stemming “short-term volatility.” The yield due February 2027 rose 48 basis points, or 0.48 percentage point, to 8.84 percent, the highest since June 2012 and within 25 points of the record high.
02.03.2014 00:33 Great economic miracle of Russia: Myth or reality?
Scientists and economists who recently met with Vladimir Putin believe that Russia has sufficient scientific and technical reserve for economic growth. According to the scientists, the activation of the intellectual potential and the rise in labor productivity will help the economy. Economist Igor Bogdanov told Pravda.Ru about possible obstacles. Russian President Vladimir Putin met with economists from RAS to identify and discuss the points of growth of the currently stagnant Russian economy. The President was presented a report compiled by 70 scientists. According to Rossiyskaya Gazeta, head of RAS Vladimir Fortov who presented the report stated that the main reserve of growth for the Russian economy was its scientific, technical and intellectual potential. The report shows that Russia has sufficient potential to stimulate the stagnant economy. Head of the Russian Academy of Sciences Vladimir Fortov made a similar comment at a meeting with the President, noting that "it is often easier to implement developments abroad than in Russia." Therefore we may hope that measures to stimulate demand for intellectual resources will also be considered. Economists estimate that if priorities are set according to the developed plan, GDP growth at the rate of 6-8 percent may be expected. Understandably, the report of the Russian Academy of Sciences is only part of the work to find a way out of the impasse faced by Russia last year. Now the biggest decisions are up to the government.
02.03.2014 00:22 U.S. economic growth revised sharply downward
The recovery appeared to be reaching escape velocity at the end of December, but it turns out the economy wasn`t expanding quite as fast as initially thought — and that doesn`t bode well for hopes of a breakout this year. The Commerce Department sharply reduced its estimate of fourth-quarter growth to a moderate 2.4% annual rate. Friday`s revision downsized big gains in consumer spending and exports from its initial estimate of 3.2% in January. The updated figures on total economic output, known as gross domestic product, indicated the economy entered this year with less momentum than analysts had anticipated. And the lower rate added to concerns that recent lackluster economic data could signal even weaker growth in the weather-battered first quarter. Consumer spending was higher than the 2% annual growth rate in the third quarter. And the pace at the end of last year was the best since the first three months of 2012. The revised export data also were strong, growing at the fastest pace in three years. In addition, business investment was revised up to a 4.5% annual rate in the fourth quarter from the initial estimate of 3.4%. But it was down dramatically from a 17.2% increase in the third quarter.
27.02.2014 15:33 Russia`s economy: Stronger than you think
Many people who remember the collapse of the Soviet Union in 1991 and its tumultuous aftermath believe that Russia`s economy today must be impoverished and unstable — and far behind booming China. Wrong. The International Monetary Fund (IMF) said Russia`s per capita income last year — measured in terms of purchasing power parity — is roughly US$18,600 (S$23,500), nearly double China`s per capita income of around US$10,000. And, according to World Bank data, extreme poverty is close to zero, compared with 11.8 per cent in China in 2009 (the most recent year for which data is available). After several years of political infighting and unnecessary delay, macroeconomic stabilization was achieved and Russia`s economic growth was restored, especially as world oil and gas prices began to rise. From 2001 to last year, Russia`s gross domestic product grew at a robust 4.4 per cent average annual rate. Russia achieved a good measure of financial stability as well. The IMF puts Russia`s inflation rate at 6.9 per cent last year, with unemployment at 5.5 per cent, while the budget deficit was only 0.3 per cent of GDP. Moreover, Russia`s foreign-exchange reserves stand at a healthy US$500 billion. However, Russia could achieve still greater success by basing its economy on two growth engines rather than one. Oil and gas will continue to provide a strong lift to the country for years to come, especially as China becomes a major customer. Nevertheless, Russia also has vast and still under-developed potential in many global high-tech industries. Russia has the know-how, skilled engineering and natural-resource base to become a global competitor in a range of major high-tech industries, including nuclear energy, commercial aviation, commercial space technology (including satellites and GPS), ICT hardware and software, electric vehicles, high-speed rail, petrochemicals, and heavy equipment for the mining and hydrocarbon sectors. All of these industries will benefit from the potential for enormous demand growth in large markets such as China, Africa and India. However, achieving long-term growth led by high-tech industries requires a business environment that encourages private-sector investment, including openness to foreign players. Moreover, the social and political environment must be conducive to a high-tech labour force, providing an attractive quality of life, ensuring civil liberties, and supporting entrepreneurship and creativity. Finally, economic policies must promote technological advances and global technical cooperation in promising sectors.
26.02.2014 17:36 World economic recovery struggling to gain traction
Another month of slower factory activity in China and a sharp decline in a closely watched gauge of U.S. manufacturing added to concern about the state of the global economy. Surveys also showed business activity across the 18-country euro zone slowed this month, confounding expectations of an acceleration. U.S. stocks edged higher, however, as investors continued to shrug off tepid data while stocks in Europe recouped earlier losses, though sentiment remained fragile. Investors were also concerned about minutes of the Federal Reserve`s most recent meeting, which showed the U.S. central bank was set to keep winding down its stimulus spending despite recent softer economic data. "While we expect the recovery to continue during the course of this year, the market remains volatile in the near-term as investors are nervous on the back of the U.S. tapering story," Henk Potts, equity strategist at Barclays Wealth, said.
24.02.2014 22:34 Shock investment slump and no Sochi surge deepens Russia`s economic woes
A dramatic slump in capital investment by Russian companies in January pointed to Russia`s ailing economy continuing to deteriorate fast. There was no sign in data of a boost from preparations for the Sochi Olympics as investment fell by 7 percent compared with a year earlier, a huge undershoot compared with analysts` forecasts in a Reuters poll of a 0.5 percent rise. The unexpected plunge in investment last month comes after a year of stagnation. It fell by 0.3 percent in 2013, according to official estimates - a major factor behind lackluster economic growth of 1.3 percent last year. The investment malaise underscores the poor state of Russia`s business climate and boosts the argument of those calling for structural reforms to diversify an economy that is too dependent on stagnant natural resource sectors. The central bank lowered its mid-term economic growth forecasts, anticipating growth of below 2 percent until at least 2016, in an acknowledgement that Russia`s economy will be sickly for some time.
24.02.2014 18:42 G20 vows to boost world economy by $2 trillion
Finance chiefs from the 20 largest economies agreed Sunday to implement policies that will boost world GDP by more than $2 trillion over the coming five years. The world economy has sputtered since the 2008 financial crisis and global recession that followed. Progress in returning economic growth to pre-crisis levels has been hampered by austerity policies in Europe, high unemployment in the U.S. and a cooling of China`s torrid expansion. The centerpiece of the $2 trillion commitment made at the Sydney meeting is to boost the combined gross domestic product of G20 countries by 2 percent above the levels expected for the next five years, possibly creating tens of millions of new jobs. World GDP was about $72 trillion in 2012. The communiqué from the meeting said signs of improvement in the global economy are welcome but growth remains below the rates needed to get people back into work and to meet their aspirations. The G20 said it would "significantly raise global growth" without overtaxing national finance through measures to promote competition and increase investment, employment and trade. As an initial step toward achieving the $2 trillion target, each country will present a comprehensive growth strategy to a summit of leaders scheduled for November in the Australian city of Brisbane. The International Monetary Fund forecasts the world economy will grow 3.7 per cent this year. It said the G20 plan could lift annual world economic growth by half a percentage point for the next five years.