The Lastest Macroeconomic News

13.07.2015 12:09 Inflation, unemployment rise sharply in Russia

Russian inflation rose sharply and unemployment increased dramatically in July, indicating that the economic sanctions and its offensive on the border of Ukraine is taking its toll domestically. The Russian Finance Ministry reported last week that inflation rose to 15.5 percent in July, and unemployment increased by 14 percent. AutoVAZ, one of Russia`s top car manufacturers, stopped its production indefinitely, The Daily Beast reported last week. The Russian government, under President Vladimir Putin, is asserting more control over its ruble currency in response to the fallout from the Greek debt crisis and other world economic maladies. The Kremlin is succeeding at keeping the ruble within an "acceptable corridor" while maintaining its reserves and positive trade balance, Putin told a BRICS summit meeting in Russia on July 9th, Bloomberg Business reported. Russia`s economy reportedly shrank by 2.2 percent year-on-year in the first quarter of 2015. Russian economic experts acknowledge the challenges in light of drops within the market, which have plagued Russian assets abroad like in China. "It`s probably premature to say that all of the risks have already been minimized and we`ll soon be enjoying at least a period of recovery," Deputy Economy Minister Nikolay Podguzov said at a St. Petersburg banking conference.

09.07.2015 17:44 Impact of Greek crisis on Kazakhstan

Kazakh experts have shared their opinions on the possible impact of the Greek debt crisis on Kazakhstan`s economy, TengriFM reports. According to the head of Analytics Department of Asyl Invest Aivar Baikenov, the crisis in Greece can influence Kazakhstan`s stock market and its economy. According to him, prices of London-listed Kazakhstani companies are already going down. For example, Kazakhstan`s Halyk Bank and Kazakhstan national oil and gas company KazMunaiGas had lowered by 2-3 percent. If the Greek crisis causes a eurozone crisis, then it is quite possible that Kazakhstan`s economy will be severely affected. We all know that over 50 percent of Kazakhstan`s goods are exported to Europe. This is largely oil. The crisis in Europe will influence this sector, in particular Europe`s demand for our products, Aivar Bakenov maintained. Meanwhile, head of the Center of Macroeconomic Analysis Olzhas Khudaibergenov believes that Greece is most likely to default on its debt soon and quit the eurozone. If Greece decides to leave the eurozone, then Europe will do its best to minimize the impact on the international markets, Khudaibergenov said. However, he expects no direct impact of the Greek crisis on Kazakhstan in general.

07.07.2015 14:21 Fitch Ratings: India to grow at 7.8% in 2015, surpass China

India is expected to grow at 7.8 percent in 2015, surpassing China`s growth rate, and further accelerate to 8 percent and 8.1 percent in subsequent years, global rating agency Fitch said. Among the BRICS grouping, GDP growth will range from 7.8 percent in India to a contraction of 3 percent in Russia and 1.5 percent in Brazil this year, said the Global Economic Outlook released by the Fitch Ratings. As regards China, the report said the growth rate "is in a gradual structural slowdown and our unchanged growth forecast is 6.8 percent in 2015, 6.5 percent in 2016 and 6 percent in 2017". "India`s GDP growth will surpass China`s this year for the first time since 1999, and accelerate to 8 percent in 2016 and 8.1 percent in 2017. Recovery from the recession in Russia and Brazil will be weak, with growth rates of only 1.5 percent by 2017," the report said. The global economy, it said, was expected to grow by 2.4 percent in 2015, followed by 2.9 percent in 2016 and 2.8 percent in 2017.

05.07.2015 17:47 Can the BRICS form an economic union?

Ever since BRICS was established, few experts have expected its members to form an informal economic union. Despite the fact that BRICS was created for informal discussions of global developmental issues, the new association is following more of a policy of economic integration and political interaction. The union of the world`s five largest developing economies has good potential for growth. These countries contain the most valuable resources for the global economy. Brazil is rich in agricultural production, Russia and South Africa in their natural and mineral resources, India has inexpensive intellectual resources and China has a powerful production base. The BRICS countries have the opportunity of forming a powerful economic bloc, which with time will be very difficult to oppose. The collective indicators of the five countries are even more impressive. According to the World Bank, BRICS`s total GDP in 2014 was around $16.5 trillion, or 18 percent of the world`s GDP. The combined currency reserves of the grouping stand at about $4 trillion, 75 percent of world`s currency reserves. The total population of the five countries is more than 3 billion. Other developing markets are also showing an increased interest in the BRICS countries. Argentina, Mexico and Indonesia could become members in the future.

01.07.2015 13:30 The Biggest Military Budgets As A Percentage Of GDP

No country worldwide comes close to matching the United States in military expenditure. In 2014, US military spending reached $571 billion, a huge distance ahead of second placed China`s $129.4 billion. However, when military budgets are viewed as a percentage of a nation`s GDP, things become very different indeed. Saudi Arabia is spending more on its armed forces than ever before, boosting its military budget by 17 percent last year. The military now amounts to at least 10.4 percent of the kingdom`s GDP, according to an estimate from SIPRI. By contrast, Washington`s enormous military expenditure only amounts to 3.5 percent of GDP. In China, that falls to 2.1 percent. Israel spent around $23 billion on its armed forces in 2014 and SIPRI estimated that this amounted to 5.2 percent of its GDP. Russia has embarked on a huge military spending binge which was estimated to have reached 4.5 percent of its GDP in 2014. This year, according to budget data, that has increased substantially to more than 9 percent of quarterly GDP, a rate of spending that is surely unsustainable.

30.06.2015 12:58 EBRD sees record $1 bln investment as Kazakhstan diversifies economy

The European Bank for Reconstruction and Development said its lending on projects in Kazakhstan was set to hit a record high of around $1 billion this year as the country races to diversify its oil-based economy. Kazakhstan, Central Asia`s largest economy and the second-largest post-Soviet oil producer after Russia, is trying to find new sources of growth in a region that has been hard hit by last year`s fall in oil prices and recession in Russia. Kazakh President Nursultan Nazarbayev has also ordered the government to develop "green energy" projects, agribusiness and small and medium-sized businesses. Kazakhstan`s gross domestic product growth slowed to 4.3 percent last year from 6.0 percent in 2013. The EBRD forecasts the economy to expand by 1.5 percent this year. The EBRD had ramped up its investment before Kazakhstan`s main trading partner Russia was hit by Western sanctions over Ukraine and low oil prices last year, the bank`s president, Suma Chakrabarti, said. Last year the EBRD financed 19 projects worth a total $700 million in Kazakhstan, he told journalists on the sidelines of the annual Foreign Investors` Council in the capital Astana.

29.06.2015 17:04 Russian economy contracts further, rate cuts predicted

The Russian economy contracted more than expected in May, increasing the likelihood of further rate cuts by the world`s ninth largest economy, while the rouble fell to a 11-day low against the dollar. The Russian Federation`s economy shrank 4.9% from a year earlier in May, registering its fifth straight month of contraction, and deeper than April`s 4.2% decline. At -4.9%, the GDP rate was at its lowest since late 2009. Analysts had been expecting a decline around the previous month`s rate. USD/RUB rose to 55.31, its highest since 15 June, from the previous close of 54.70. The currency pair had been rising over the past several sessions, and over this week the rouble has fallen more than 2.3%. This reversed much of the gains since 15 June, when the central bank announced its latest rate cut that took the benchmark interest rate to 11.5%. The Rouble had made some gains after the rate move, sending the pair to a two-week low of 52.95 in the next three days, but the correction of late has ensured that the Russian unit is on course to end the month weaker.

27.06.2015 17:24 Ukraine`s Economy Is A Disaster. Its Demography Is Even Worse

It appears as if Ukraine might have reached a deal that will give it sufficient financial breathing room. According to The Moscow Times a plan proposed by Ukraine`s creditors, who have previously indicated an almost total unwillingness to accept any substantial restructuring of the country`s foreign debt, would give the country $15.8 billion in total savings. This is actually marginally more than the IMF had recommend in the bailout it orchestrated back in March, and is a lot better than what seemed like Ukraine would be able to get just a few weeks ago. It still might not be enough for Ukraine to avoid disaster, the country`s financing needs have grown as the economy has fared far worse than initially expected, but it`s a rare bit of a good news. Things could conceivably stabilize. Whatever the status of Ukraine`s economy, though, and even with if this debt deal is finalized it will still be on very precarious ground, its demographics are in a far more parlous state. According to the latest data from Ukraine`s committee on state statistics and Rosstat, which has taken over responsibility for monitoring Crimea`s population in the aftermath of its annexation by Russia, Ukraine`s population including Crimea and Sevastopol declined by more than 250,000 between 2014 and 2015.

26.06.2015 18:43 World economy may be slipping into 1930s Great Depression problems

RBI Governor Raghuram Rajan has asked central banks from across the world to define `new rules of the game` as he warned that the global economy may be slipping into problems similar to the Great Depression of the 1930s. Rajan, who has been warning against competitive monetary policy easing by central banks, however, said the situation is different in India where RBI still needs to bring down lending rates to spur investments. He expressed concern that the world may be slipping into the kind of problems of the depression of the 1930s and an international consensus was needed to be built over time. "We need rules of the game in order to effect a better solution. I think it is time to start debating what should the global rules of the game be on what is allowed in terms of central bank action," he said at a London Business School (LBS) conference here last evening. "I am not going to venture a guess as to how we establish new rules of the game. It has to be international discussion, international consensus built over time after much research and action," Rajan said. "But I do worry that we are slowly slipping into the kind of problems that we had in the thirties in attempts to activate growth. And, I think it`s a problem for the world. It`s not just a problem for the industrial countries or emerging markets, now it`s a broader game," he noted.

24.06.2015 19:29 Ruble Is Elephant In Room as Russia Invokes Inflation Threat

Russia`s central bank Governor Elvira Nabiullina cited the threat of inflation as she warned future interest-rate cuts would be smaller and fewer. Economists see a different reason: the ruble. After lowering its key borrowing cost at every meeting this year by at least 1 percentage point, Nabiullina said Monday that inflation would limit the scope for further easing. While prices are rising at almost four times the central bank`s 4 percent target, the pace has slowed from a 13-year high in March as consumer demand weakens. If the central bank was targeting inflation, they would emphasize downside risks given that demand is contracting faster than they expected, Tatiana Orlova, the chief Russia economist in London for Royal Bank of Scotland Group Plc, said by e-mail. There`s an elephant in the room, whose name is the ruble. The assessment highlights the skepticism among analysts that Russia has given up targeting a ruble exchange rate seven months after it announced the switch to a free float. This year`s best-performing currency became the worst in the past month and domestic bonds fell after the central bank spent about $3.8 billion buying foreign exchange. The Bank of Russia is trying not to upset the foreign-exchange market, as an aggressive cut could provoke a new bout of ruble weakening, Orlova said.

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