The Lastest Macroeconomic News

28.01.2014 19:31 World Economic Situation and Prospects 2014: global economy is improving but remains vulnerable

The global economy is expected to grow at a pace of 3.0 per cent in 2014 and 3.3 per cent in 2015, compared with an estimated growth of 2.1 per cent for 2013, according to the United Nations World Economic Situation and Prospects 2014 (WESP) report, launched on 20 January 2014. The world economy experienced again subdued growth in 2013, but some improvements in the last quarter have led to the UN`s more positive forecast. The euro area has finally ended a protracted recession. Growth in the United States strengthened somewhat. A few large emerging economies, including China and India, managed to backstop the deceleration they experienced in the past two years and veered upwards moderately. Developing countries as a whole will benefit from resilient domestic demand and an improvement in global conditions. These factors point to increasing global growth. However, the WESP stresses that the employment situation will continue to be challenging and warns that international capital flows to emerging economies are expected to become more volatile, in particular in the case of a bumpy exit from the quantitative easing programmes by the U.S Federal Reserve. Other main uncertainties and risks include the remaining fragility in the banking system and the real economy in the euro area. Beyond the economic domain, geopolitical tensions in Western Asia and elsewhere remain serious risks. These and other risk factors, unfolding unexpectedly, could derail the world economy far beyond the report`s projections.

26.01.2014 14:34 Will China Overtake US Economic GDP World Leadership by 2028?

The headline story, framed by London`s Center for Economic and Business Research has China overtaking the U.S. as the world`s leading generator of gross domestic product within 14 years. This has taken into account an annual U.S. GDP increase of barely reaching 3%, while China, despite increasing problems in agricultural to industrial conversion, will manage a doubling of the U.S. rate during that time period. When delving into the broader projections of the CEBR report, it indicates a further weakening of the European economy as a whole. It posits a slower-growth Germany and France, who would do much better if the European Community broke up, an event that CEBR and other knowledgeable analyst don`t expect. Other items of interest are an optimistic outlook for the United Kingdom, which is expected to leapfrog both Germany and current Eucom`s No. 2 France by 2028. But CEBR is especially high on India and its booming technological advances, expecting it to overtake Japan in the world`s No. 3 slot by the 2028 mark. The London-based international economic forecaster also expects Brazil to combine its natural resource potential, geographic size, and population exceeding 200 million to be the first previously underdeveloped global nation to join the world`s top five producers of goods and services by 2030. Although CEBR`s projections of shifting world standings are built on sound futuristic developments, it`s very likely that current leaders U.S., China, Germany, France and the U.K. will hold their own in the immediate term, while Brazil and India have the likeliest possibility of developing into world-class leadership positions during the following 2020-2030 decade.

24.01.2014 15:55 Ruble Drops to Five-Year Low

The Russian ruble dropped to a five-year low on January 24th and both officials and market players expect its depreciation to continue. Versus the euro-dollar basket, the central bank`s main barometer of the currency market, the ruble slipped to 40, a level last seen in February 2009, during a financial crisis that was accompanied by so-called controlled devaluation, when the central bank was intervening heavily to avoid a rapid drop in the ruble rate. The ruble has shed more than 3% versus the basket so far this year after weakening by nearly 10% in 2013. The ruble came under pressure in the middle of last year amid expectations that the U.S. Federal Reserve would taper its stimulus efforts, while slowing economic growth and heavy capital flight hit the currency domestically. Seasonally higher gas exports and the Winter Olympics were widely expected to help the ruble to recover early this year but that hasn`t materialized yet. Economy Ministry Alexei Ulyukayev said that the ruble now has more chance to ease than strengthen because of the deteriorating current-account surplus.

20.01.2014 21:46 Medvedev said Russia needs to boost small businesses in 2014

Prime Minister Dmitry Medvedev told investors that Russia, as the world`s ninth-largest economy, faces an array of “critical masses” to spur growth this year after a set of disappointing figures in 2013, a year of broken illusions for Russia. GDP added just 1.3 percent, while most analysts expected an average growth of 4 percent. Medvedev said 21.5 billion rubles ($640 million) in government subsidies were doled out in support of small- and medium-sized businesses in 2013, and it will be more in 2014. Small businesses contributed 20 percent to Russia`s GDP in 2013, and Medvedev predicts it will continue to be a force in boosting economic growth in Russia. The goal is to increase the contribution to 50 percent by 2020, to mirror Europe`s small business economic model, which is currently at about 50 percent. On paper the plan is good, but implementation hasn`t been stellar. Statistics show four million small businessmen were registered at the beginning of 2013, and by the end, this number had dropped close to 3.5 million. Stagflation, ineffective state-owned companies, a dip in oil prices, capital flight, and weak investment all pose direct threats to the Russian economy in 2014.

18.01.2014 20:43 OECD Report on Russia Specifies Ills and Antidotes

Russia needs to address its poor business climate and improve education to reverse an economic slowdown that is being compounded by its structural problems, the Organization for Economic Cooperation and Development, or OECD, said. The OECD said Russia`s economic downturn was primarily the result of a slide in its growth potential, in addition to the end of the period of fiscal expansion that preceded President Vladimir Putin`s election to a third Kremlin term in 2012. The OECD report said recent signs of a crackdown against corruption by the authorities appeared to be genuine, and welcomed signs that companies are less concerned about the efficiency of the court system than in the past. But it was concerned that Russia`s record on press freedom was not improving - noting Russia ranks 148th out of 179 countries, according to a press freedom index published by Reporters Without Borders. The OECD criticized recent restrictions on public assembly and nongovernmental organizations, or NGOs, as negative for transparency and accountability. Corporate governance is also a key problem, the report said, leading to low company valuations and reduced revenues from privatization. It recommended requiring state-owned companies to comply with tough stock exchange listing requirements. The OECD also criticized Russia for the prominent role played by state companies in the economy, calling for it to push ahead with privatization of state companies and banks that dwarf their private-sector competitors. It adding that an ambitious plan for the government to sell its holdings in all sectors except natural monopolies, oil and defense, was significantly scaled back last year.

16.01.2014 20:31 Rich nations to get richer: World Bank raises forecast to 3.2% growth

The world economy has reached a turning point five years after the global financial crisis hit. The World Bank expects growth to pick up in 2014 led by the US, Europe, and Japan, and warns of `turbulence` from a slowing China as well as US tapering. Overall, the Washington-based organization sees the world economy expanding 3.2 percent in 2014, in their first report of the year, `Global Economic Prospects`, a bi-annual publication published on Jan 14th. The Bank has bumped up expectations for "high-income countries", which they say will grow 2.2 percent in 2014, up from 1.5 percent in 2013. A growth pick up will be supported by the US, which has shown strong signs of recovery and the 18-member euro currency zone, which dragged down other economies in 2013 on weak consumer demand and imports. Increased import demand should help compensate for more US tapering measures, which could deliver a big blow to emerging markets. Developing markets are vulnerable to risk both from China and US tapering, and commodities will continue to be sensitive to both factors. China`s economic growth, which dropped below 8 percent for the first time in 20 years, will continue to slow. GDP is estimate to remain `flat` at 7.7 percent, and then decrease to 7.5 percent in 2015 and 2016. Growth in the world`s second-largest economy has been lackluster because it is shift into a more sustainable consumption-based, instead of an export-led economy, which led to sensational growth in the 90s. Russia`s economic growth is set to accelerate to 2.5 percent this year from 1.4 percent in 2013, according the government. The World Bank optimistically forecasts growth at 2.2 percent in 2014, 2.7 percent in 2015, and 3.0 percent in 2016. Projections for BRICS countries were cut. Brazil`s growth forecast was cut to 2.4 percent from 4 percent, for Mexico to 3.4 percent from 3.9 percent and for India to 6.2 percent from 6.5 percent. Developing countries will accelerate `modestly` between 2013 and 2016, but “the slower growth is not cause for concern” the report said.

15.01.2014 14:06 Germany 2013 GDP Rises 0.4%; 4Q Up About One Quarter

German GDP growth eased to its slowest pace in four years as slower export growth and another fall in domestic investment contributed to the weakness, the Federal Statistical Office estimated. Real GDP rose 0.4% on the year, driven entirely by internal consumption, after +0.7% in 2012 and +3.3% in 2011. The full-year estimate was slightly below the median forecast of +0.5% in MNI`s poll of analysts. "The economic situation in Germany has improved over the course of the year 2013 after a weak phase last winter," Destatis President Roderich Egeler told reporters in Berlin, adding the numbers showed Germany`s economy remains "stable." Preliminary figures for the full year suggest that GDP rose about one quarter of a percentage point in 4Q, according to Norbert Rat of Destatis, following a 0.3% quarterly rise in 3Q. Rat estimated the statistical carryover into this year would come to +0.5% after a negative carryover in 2012. Destatis emphasizes that its 4Q estimate is only from preliminary assumptions. Official 4Q preliminary figures are scheduled for release on February 14, with a detailed breakdown planned for February 25.

10.01.2014 14:24 New challenges for Russia`s economy in 2014

Next year may prove quite challenging for the Russian economy, as the negative trends carry over from 2013. Experts warn that the economic forecast offered by Russia`s Ministry of Economic Development may be too optimistic. The government needs to be prepared for decisive action in order to improve the situation, a the key negative trends which slowed Russia`s economic growth in 2013 are expected to carry over into 2014. Most experts agree that GDP will grow at a modest 1 percent to 2 percent in 2014, or below the forecast of the Ministry of Economic Development. "No fast economic growth is to be expected in 2014," said Maxim Petronevich, the chief expert at Gazprombank`s Center for Economic Forecasting. "It could prove to be as slow as 1 percent to 1.5 percent, even despite the positive effect of the Sochi Olympics. However, this should not be perceived as a negative trend. Slow growth is a natural phenomenon and a normal phase of any economic cycle anywhere in the world." Petronevich believes there will be an active revision of economic growth drivers in 2014. The private sector, supported by private initiative, is a promising big segment with minimum government intervention. Another opinion has it that the defense industry may become a new growth area. "New production enterprises and new jobs may get created in this sector, and this will have a multiplier effect," said Vladimir Klimanov with the Russian Academy of the National Economy of the Russian Government (RANEPA). "Entire chains of related production facilities may be set up, supporting the development of individual regions."

05.01.2014 23:33 China`s GDP growth in 2013 set to be weakest since 1999

China`s economy, the world`s second largest, may have grown around 7.6 per cent in 2013, its weakest growth since 1999, with latest economic figures indicating sluggish economic activities in the last quarter. The National Bureau of Statistics (NBS) is scheduled to release China`s macroeconomic data for the fourth quarter and the entire year of 2013 later this month. China`s economy expanded by 7.7 per cent in the first nine months of 2013. GDP growth in the third quarter accelerated to 7.8 per cent from 7.5 per cent in the second. On December 25, a report submitted by the Cabinet to the parliament said China`s economic growth in 2013 is likely to stand at 7.6 per cent. If confirmed, it would be the weakest growth since 1999 in the aftermath of the Asian financial crisis. Reporting to the Standing Committee of the National People`s Congress, the top legislature, Xu Shaoshi, minister of the National Development and Reform Commission said international and domestic economic conditions have changed. Xu said China`s economy faced many problems. Service industries have still to realize their full potential, strategic emerging industries are in their infancy, and industries such as steel, cement, electrolytic aluminum, plate glass and shipbuilding experienced overcapacity. Financial risks are also looming, with a hefty proportion of debt financing concentrated on public infrastructure projects that only generate low returns in the long run. There is already oversupply in the manufacturing and real estate sectors, he was quoted as saying by the official Xinhua news agency. If China fails to handle its government debt properly, “it will easily trigger systemic financial danger”, Xu warned.

27.12.2013 19:27 Russian economy showed mixed results in 2013

The Russian economy started to stagnate at the end of the year. Throughout December, Russian and foreign experts lowered their forecasts of most key indicators. A review of forecasts shows different expectations, however, they all agree that the domestic situation, rather than external factors, was the biggest influence on 2013. There are two main reasons for this: - Reduction of investments into fixed assets by large state-owned companies, including the energy sector. This was a key factor that contributed to the economic slowdown in 2013. - A slowdown in consumer demand, due to large debt loads of the population. According to the Central Bank, the loan burden per worker is about 3.7 average monthly salaries. However, it is believed that despite the deterioration of individual indicators, the overall situation is not critical. In 2013, Russia`s economic policy was focused on balancing trade and economic relations with other countries, and reducing its dependence on the European market. Therefore, the main trends are the deepening of integration with Commonwealth of Independent States (CIS) countries and the strengthening of relations with Asian countries. Within the CIS, this comes via the development of a customs union with the prospects of forming a single economic space by 2017. The integration with East Asian countries in the field of oil and gas exports intensified as well, particularly in cooperation with China, South Korea and Japan. These countries became interested in Russia as well, and began to invest in resource projects, primarily in eastern Siberia. In 2013, Russia announced the country’s first low-cost airline and smartphone. The low-cost carrier, Dobrolet, a subsidiary of Aeroflot, has already started staff recruitments. This year also saw the arrival of the first Russian smartphone, the IotaPhone. Experts have called it an absolute breakthrough of the year.

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