The Lastest Macroeconomic News
13.01.2016 20:28 The Possibility of $20 Oil Doesn`t Sound So Crazy Anymore
The world mostly ignored Ed Morse 11 months ago when the head of commodities research at Citigroup said oil could drop as low as $20. It`s paying attention now that crude has tipped below $30. Crude futures in the U.S. sank into the $20s for the first time in more than 12 years on Tuesday, hours after BP Plc said it would slash an additional 4,000 jobs, Petroleo Brasileiro SA cut its spending plan and Petroliam Nasional Bhd. warned that it faces several tough years. Morse, who wrote in a Feb. 9 research note that oil could fall "perhaps as low as the $20 range for a while," said in Calgary Tuesday that the world is now confronting $20 oil. “The $20 number is something you have to talk about,” Morse said. “When you`ve seen a $10 price slide and WTI is trading just slightly above $30, the likelihood is fairly great. Clearly oil markets cannot maintain a price at below the $30 level for very long. The question is how much longer.” West Texas Intermediate fell as low as $29.93 a barrel before settling at $30.44 Tuesday, the lowest since December 2003. It traded on Wednesday morning in London at $30.79.
12.01.2016 13:17 Russian Economy Killers: Oil and Sanctions
Russian President Vladimir Putin gets a bad report card, even a failing grade, for his handling of the economic crisis in his country, according to 27 percent of analysts who participated in a major survey conducted by Bloomberg Business. These are hard times in Russia, with the collapse in oil prices, economic sanctions against the country for its actions in Ukraine, the collapse of the ruble and significantly impaired economic growth. Russia`s growth started to decline rapidly in the first quarter of 2012, well before oil prices fell or economic sanctions took hold. The World Bank estimates that by 2017, Russia`s GDP will be smaller than it was in 2012. Russia`s former finance minister, Alexei Kudrin, says he believes the economy is likely to decline in 2016, although he thinks growth is possible in 2017. Others see growth even earlier. "The worst, I think, is over at this point,” said world-renowned Russian expert Timothy Frye of Columbia University`s Harriman Institute. “From 2012 to 2015, economic growth in Russia decelerated at a rate of around 1.5 to 2 percent a year. The last quarter, we`ve seen the economy start to stabilize and adjust to the new reality of lower oil prices. "So, although the consensus forecasts are for around zero or around 0.5 percent or maybe 1 percent growth in the coming year, what`s really concerning about the economy going forward is that nobody is predicting rates of economic growth beyond 1 percent, 2 percent, barring some really significant change in government policy," he added. Frye believes that people don`t expect those government policies to change very much because they would come at great political cost.
10.01.2016 11:47 The World Bank: Outlook for World Economy
The World Bank has cut its forecast for global growth this year, citing weakness in the developing world. The aid agency said Wednesday that it expects the world economy to expand 2.9 percent in 2016, down from the forecast of 3.3 percent it made in June. The global economy grew 2.4 percent in 2015. Several big developing economies -- including Brazil and China -- are slowing or shrinking. Their troubles have disproportionately hurt their smaller trading partners, which have also been squeezed by depressed commodity prices. The World Bank expects developing countries to collectively grow 4.8 percent, up from a six-year low of 4.3 percent in 2015. China, the world`s second-biggest economy, is expected to register 6.7 percent growth, down from 6.9 percent in 2015 and the slowest pace since 1990. The economic prospects of advanced economies appear to be brightening as the developing world struggles. The World Bank expects the U.S. economy to grow 2.7 percent this year, up from 2.5 percent in 2015 and the fastest pace since 2006. The agency foresees the 19-country Eurozone economy expanding 1.7 percent, up from 1.5 in 2015 and fastest since 2011. And it expects the Japanese economy, buoyed by the Bank of Japan`s easy-money policies, to grow 1.3 percent, up from 0.8 percent in 2015.
08.01.2016 18:32 World economy feels the impact when China takes a knock
If the past six months` economic news has taught the world one thing, it is that a bump in China`s economy cannot be ignored. The question is whether the rest of the world feels a gentle ripple or a tidal wave. China is now the world`s largest economy measured by the quantity of goods and services produced, and the International Monetary Fund expects the country to account for almost 18 per cent of world economic activity in 2016. This implies that the drop in its growth rate from an expansion of more than 10 per cent in 2010 to 6.3 per cent expected this year has directly knocked about 0.75 percentage points off the global growth rate. The spillover effects, however, are much broader than this direct calculation of China`s importance. Maury Obstfeld, the IMF chief economist, says he is most worried about these knock-on effects in 2016. “The global spillovers from China`s reduced rate of growth... have been much larger than we would have anticipated,” he said this week.
06.01.2016 18:28 What a strong US dollar means for the Russian economy
The decision by the US Federal Reserve to raise rates for the first time since the financial crisis marks the beginning of the strong dollar era. This in combination with falling crude prices poses a new challenge for the Russian economy in 2016. But out of all the major oil producers, Russia may be best suited to deal with a strong dollar and cheap crude. Russian oil companies pay most of their expenses in domestic currency (a weak ruble) while getting hard currency (a strong US dollar) for their product. The Kremlin has the option to force Russian oil companies to sell more of their dollar revenues and increase taxes. This would solve two problems. Converting dollars to rubles would strengthen the domestic currency and extra taxes would fill the budget holes. Other oil producers may not be as fortunate. Despite falling oil prices, Saudi Arabia is refusing to cut crude output in order to defend its market share. Riyadh is hoping to squeeze out its competitors, primarily the US and Russia. But that`s a dangerous game as Saudi Arabia is at risk of depleting its financial assets within five years.
04.01.2016 13:52 World economy of so-so growth and fat-tailed risk
What lies ahead for the world economy in 2016? The good news is that it is almost certain to grow. Only a huge adverse shock - another global financial crisis or a war among great powers - would stop growth altogether. According to Consensus Forecasts, global growth is expected to be 2.8 per cent in 2016, up from 2.6 per cent in 2015. This forecast looks quite tolerable. But it hides important economic divergences and downside risks. Virtually all high-income economies have returned to growth. The Eurozone economy is forecast to grow 1.7 per cent in 2016, up from 1.5 per cent in 2015. The UK economy is forecast to grow by 2.3 per cent and the US economy by 2.5 per cent. Japan`s is forecast to grow 1.2 per cent in 2016, up from 0.6 per cent. Asia (excluding Japan) is forecast to lead the world economy, once again, with growth of 5.7 per cent. India`s is expected to be the fastest-growing large economy in the world, with growth of 7.8 per cent in 2016, against 6.5 per cent in China. But Brazil and Russia are in recession: the former`s growth is forecast at minus 2.2 per cent in 2016, after minus 3.5 per cent in 2015. Russia`s growth is forecast at minus 0.2 per cent, against minus 3.8 per cent in 2015.
02.01.2016 13:11 The World Economy`s Winners and Losers in 2015
When the final numbers are tallied, 2015 will probably count as another disappointing year for global growth. The muted performance came even as central banks continued to pump in liquidity, oil prices plunged again and inflation was moderate. It was also a year of divergent performers. While tumbling commodity prices took the shine off big emerging markets Russia and Brazil, other emerging economies like India and Vietnam surprised on the upside. In the developed world, robust U.S. jobs growth prompted the Federal Reserve to tighten monetary policy for the first time since 2006, while the gloom around neighboring Canada deepened.
31.12.2015 15:29 Oil Crash Shrinks Russian GDP; Energy Minister Blames Saudis
Russia`s oil-dependent economy appears headed for a second year of recession, and Energy Minister Alexander Novak says the blame falls squarely on the Saudis. The Russian gross domestic product fell by 4 percent in November from its level in the same month in 2014, and had shrunk 3.7 percent in October from its levels a year earlier, the Economy Ministry reported Monday. The reason, to no one`s surprise, is the plunge in oil prices over the past 18 months. The global average value of a barrel of oil has crashed from over $110 per barrel in the summer of 2014 to just below $40 per barrel today. Because Russia`s government relies on oil production for half its revenues, it`s preparing for a 3 percent deficit in the budget for the coming 2016 fiscal year. Making matters worse, profits in any industry related to oil are down so far that it appears its current recession may last as long as two years.
30.12.2015 18:45 These 5 Trends Will Shape the Global Economy in 2016
Every year brings its share of economic events that take us by surprise. Few people predicted the collapse in oil prices that started in the summer of 2014, or were able to time the sharp decline in economic growth in China that started a few months ago. That said, many of the economic trends that shape our world can be spotted ahead of time by careful observers. For instance, many pundits argued that the Federal Reserve wouldn’t be able to raise rates this year, but a close examination of the data would have enabled you to predict the Fed’s December liftoff. In 2016, new economic trends will emerge or gain steam, and shape the world we live in for the better or worse. Here are the top five: 1. The Global Economy Will Continue to Be Powered by America. 2. China Will Stay Stuck in Second Gear. 3. Commodities Will Be Cheap. 4. Europe will edge closer to crisis. 5. India will become the new growth king.
29.12.2015 14:39 No pick-up in world economy in 2016
The world economy may be set for another year like 2015, with modest growth in developed economies offsetting persistent weakness elsewhere but generating very little inflation and keeping interest rates low. The US Federal Reserve`s long-awaited rise in rates from zero showed confidence in the world`s largest economy, but rival China is still struggling for a foothold with rate cuts. Although some countries, such as Brazil, have mainly home-grown inflation troubles, the Fed`s first post-crisis rate increase is an unlikely cure for what ails the rest of the world. With exchange rates dominating the policy debate in many countries, what happens to the dollar will matter a lot. “The key question is whether the US economy is finally robust enough not only to sustain its own recovery but also to lift world trade and global growth enough to allow the external deflationary pressures weighing on US inflation to wane,” outlined HSBC economists Janet Henry and James Pomeroy.