The Lastest Macroeconomic News

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.

03.11.2015 00:10 China`s GDP growth targeted to 6.5 to 7% through 2020

China is aiming to maintain an average annual GDP growth rate of 6.5 to 7 per cent until 2020, without aggressive stimulus or blind expansion of investment, said Vice-Premier Zhang Gaoli on Sunday. "If China can successfully achieve the 13th Five-Year Plan (2016-20), we will avoid the middle-income trap, which will be a miracle in the world`s development history," said Zhang, in his speech during the opening ceremony of the 2nd Understanding China Conference. The conference, in Beijing, was jointly hosted by the government think tank China Institute for Innovation and Development Strategy, Chinese People`s Institute of Foreign Affairs and the US-based 21st Century Council. "We predicted that from 2011 to 2015, the average annual growth rate would achieve 7.8 per cent," said Zhang. He said that innovation was the key to driving development, and major problems should be solved during the economic restructuring reforms. The fast but unsustainable development model should be abandoned, he said.

31.10.2015 12:48 Russian economic slump to persist as oil price languishes

Russia`s economy will slump by almost 4 percent this year and barely grow in 2016, a Reuters poll predicted on Thursday, with forecasters expecting the country`s recession to persist as oil prices remain depressed. The poll predicted that gross domestic product would end up shrinking 3.9 percent this and grow by 0.3 percent next year, only slightly better than a previous Reuters poll in September that predicted a 4 percent decline in 2015 and a 0.2 percent rise in 2016. Russia`s economy has been hit by falling global commodity prices and is coming under stress from sanctions imposed on it by mainly Western nations angry over what they see as Russia`s aggressive policy towards Ukraine. Recovery prospects have been dimmed by signs that a global glut of oil will continue for the foreseeable future, keeping the price of Russia`s main export depressed at around $50 per barrel.

29.10.2015 12:34 Will US Economy be Impacted by China`s Currency Devaluation?

Unfortunately, China`s ongoing currency devaluation will have a negative impact on U.S. exports. This will not only impact the 7% of U.S. exports comprised by trade with China, but also other emerging Asian nations. U.S. imports are registering 18% from China alone. These and East Asian nations` imports will become more attractive, due to their softening currencies. With America`s technology sector, especially Apple`s Iphone heavily dependent on China exports, it will take significant price cuts to also maintain the high volume dependence by such companies as Intel, Nvidia, and Broadcom. Regarding China`s immediate future growth, the current Xi Jinping government`s re-evaluation of China`s red-hot economic expansion will likely end the almost 20 years of double digit and high single digit annual gross domestic product acceleration. While India will likely surpass China`s population and GDP growth this year, its commercial and industrial growth is far behind the levels that China has so far achieved in the 21st century. It also means that expectations of China surpassing the U.S. in world leadership in economic totality is unlikely to happen by mid-century.

28.10.2015 13:54 Is the global economy heading for recession?

Troubles in emerging markets are beginning to affect the developed world. As far as economic expansions go, our`s is pretty long in the tooth. Since World War II, the average length of time between recessions is about 58 months. With the current cycle clocking in at 81, it`s natural to wonder if the next downturn is imminent. Meanwhile, a worrying level of data from abroad shows that the troubles in emerging markets are beginning to affect the developed world: In Germany, Europe`s strongest economy, exports fell 5.2% in August from the previous month, the Federal Statistics Office in Wiesbaden announced. In the U.K., where growth had been outstripping most of the rest of the developed world, recent data shows output in Britain`s construction sector plunged by 4.3% in August, the sharpest monthly drop since 2012. In Japan, things don`t look much better. Serious declines in industrial output over the summer suggest to some that the world`s third largest economy has already fallen back into recession. Former Treasury Secretary Larry Summers also sees global economic trouble up ahead. In an op-ed published on Thursday titled “The global economy is in serious danger,” he argues that rising economic inequality, slowing population growth, and the increased need for financial regulation, and the fact that the innovation that is taking place isn`t very labor intensive all point to a slowdown.

27.10.2015 13:22 Why Russian inflation will fall `abruptly` next year

Russia`s troublesome inflation rate will start to drop "abruptly" by the start of next year, the governor of Russia`s central bank told CNBC, as the monetary authority`s "tough" monetary policy starts to have the right effect. Inflation in Russia stands at 15.7 percent, a far cry from the central bank`s inflation target of 4 percent. The country`s central bank kept interest rates at 11 percent in August in a bid to tackle the high rate, a controversial move for a bank to make while an economy is in recession. Russian Central Bank Governor Elvira Nabiullina told CNBC this weekend that the bank needed to focus on cutting inflation, despite Russia`s turbulent economy, which is expected to shrink 3.7 percent this year. "The International Monetary Fund sees Russia`s inflation rate to be higher than our forecasts, and it means that we should be more attentive to the inflation risks, because our task is to reduce inflation to achieve our goal of 4 percent by 2017," Nabiullina said, speaking to CNBC on the sidelines of the International Monetary Fund/World Bank`s annual conference in Peru.

26.10.2015 11:47 This is how much Russia`s war in Syria costs

Russian air strikes in Syria are costing up to $4 million per day, according to data collected by a defense think tank for the Moscow Times newspaper. Data collected by IHS Jane`s, a renowned intelligence provider for the defense industry and governments, showed that bombing raids, supply runs, infrastructure and ground personnel — along with a salvo of cruise missiles fired into the conflict zone — have cost Russia between $80 million and $115 million since strikes began on September 30. Compared to Russia`s 3.1 trillion ruble ($50 billion) defense budget for 2015, the figure appears low but the Kremlin could see its costs and commitments grow, the Moscow Times reported. Russia is currently struggling economically on the back of international sanctions placed on the country for its annexation of Crimea in 2013 and role in the pro-Russian uprising in east Ukraine last year. Sanctions provoked investor caution over Russia which saw capital outflows and a fall in the ruble`s value as a result. That, coupled with the sharp decline in oil prices, has contributed to Russia`s parlous economic situation, yet, still it has willingly embarked on what could be a costly enterprise in Syria. Ostensibly involving itself in the civil war in the Middle Eastern nation in order to help an alliance of western powers trying to combat the terrorist group that calls itself "Islamic State," many believe that Russia`s real aim is to prop up the regime of controversial Syrian leader Bashar Al-Assad and to prevent more western influence in the region.

26.10.2015 00:10 Real Estate and Construction Sector Overview 2015

The real estate and construction sectors, including the many professions and fields associated with them, are among the larger components of the global economy. As of early 2015, the U.S. Bureau of Labor estimated that 6.34 million Americans were employed in the construction industry (up substantially from 5.97 million at the beginning of 2014, but down dramatically from a peak of 7.6 million in 2007). The agency also estimated that 1.5 million Americans were employed in the real estate industry as of early 2014 (this figure is also up from 1.48 million as of the beginning of 2014, and equal to the 1.5 million of 2007). There was $13.4 trillion in all outstanding mortgage debt in America at year-end 2014, up slightly from $13.2 trillion one year earlier including homes and commercial projects. (Many houses are being purchased with cash, particularly when the purchaser is an investor. This mortgage total included $9.8 trillion in home mortgages, essentially unchanged from 2013). The total of all mortgages was $14.3 trillion in 2009. Home prices have rebounded dramatically from the depths of the recent recession, but in many markets they remain below their 2006-07 peaks. However, prices have risen to the point that bargains are hard to come by. More than a few observers are concerned that another housing bubble is developing in the most popular markets. Meanwhile, real estate had enjoyed a significant boom over the recent past in China, Canada, Australia and a few other select spots. By mid-2015, however, many international real estate markets were off their recent highs, including significant softness in China. Australia was suffering from a slump in coal, iron ore and other commodities, and Canada was suffering from a drop in oil and gas prices. These conditions hurt home prices.

23.10.2015 17:47 VTB Head: Russia`s end-game in Syria unclear

Russia`s involvement in the Syrian conflict could still either exacerbate or strengthen its relationship with Western powers, one of the country`s most influential business figures told CNBC. "Syria might become an area for co-operation or conflict," Andrey Kostin, president and chairman of Russian bank VTB, told CNBC. "Putin is very much trying to find a political situation." Russian President Vladimir Putin entertained controversial Syrian president Bashar Assad in Moscow this week, despite Assad`s status as a pariah to many Western governments. Russian forces, despite Moscow`s insistences that they are only targeting terrorists, have been criticised by the U.S. for backing the embattled regime`s military campaign in the war-torn country. "It`s very important that Assad goes to Russia, because unless you talk you won`t find a solution," Kostin said. He acknowledged the effect the cooling of relationships with the West was having on Russia`s economy, which has been battered by plummeting oil prices. "Never before, at least since the collapse of Soviet Union, has Russian business been so affected by the geopolitical situation," Kostin said. "We are very against the use of economic instruments in political conflicts, but that`s what we have." Kostin warned about the potential to broaden the sanctions, imposed on various Russian individuals and businesses. "We don`t think there will be new sanctions, but the EC (European Commission) has the opportunity to broaden the connotation of sanctions," he said, citing as an example that banks could not give advice on Russian investments.

21.10.2015 14:18 China GDP growth falls to 6.9% in Q3 2015

China`s economic growth slowed to 6.9 per cent in the third quarter, authorities in the world`s second-largest economy say, as global markets worry about its prospects. The figure released by the National Bureau of Statistics (NBS) was the worst for more than six years, although it was marginally above the median forecast in a poll of analysts by AFP. As the world`s biggest trader in goods and a giant market in itself, China is a key driver of the global economy, and stock exchanges around the world have been pummeled in recent weeks by concerns over its future. NBS`s figure is the first official confirmation of investors` fears over GDP since a Chinese stock market slump over the summer followed by a surprise currency devaluation in August. An NBS spokesman described the decline as a "slight slowdown", but said the economy was still running within a “proper range”. The spokesman said in a statement that “internal and external conditions are complicated”, acknowledging that “downward pressure for economic development still exists”. China`s GDP expanded 7.3 per cent last year, the slowest pace since 1990, and at 7.0 per cent in each of the first two quarters of this year. Beijing has set a target of “around seven per cent” for growth this year.

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