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14.04.2015 14:50 Russia`s ruble: From down-and-out to darling

What a week it`s been for Russia`s ruble - the currency that was in crisis in December has hit new highs against the dollar and euro to become this year`s best performer in foreign exchange markets. The ruble soared as much as 2 percent against the dollar on Friday to around 50.30, it best level since December. In addition, it jumped as much as 2.5 percent against the euro to around 53.40 per euro, a high for the year. Analysts said that a stabilization in the price of oila key export for Russiaplus relative calm in Ukraine and a perception that Russia`s economic outlook is not as bleak as feared help explain the rebound. "It came as a surprise for everyone, oil is a little higher and the main factor, but doesn`t explain the full extent of the rebound," said Liza Ermolenko, emerging market economist at Capital Economics. "The economy has not collapsed as many people expected, so this may also be a reason for the ruble`s recovery," she added. Russia`s economy, weighed down by sanctions and weak oil prices, is slipping into recession, but there are some signs of light on the horizon further ahead. Earlier this week, ratings agency Standard and Poor` upgraded its prediction for Russian economic growth in 2016 to 1.9 percent, from a previous forecast of zero growth. Ermolenko and other analysts added that the speed of the currency`s recovery from a crisis in December, when it lost over 30 percent of its value in just two days, has been somewhat unexpected. A fifth day of gains has put the ruble up almost 12 percent against the dollar so far this year making it the best performing emerging market currency, analysts said. It`s also well ahead of major currencies such as the euro and Japanese yen, which are weaker against a broadly robust dollar. The U.S. dollar index, which measures the greenback against its peers, is up about 9 percent this year.

13.04.2015 17:20 S&P sees Russian economy growing 1.9% in 2016

Credit rating agency Standard and Poor`s expects the Russian economy to turn to growth in 2016, adding 1.9 percent. This comes as a sharp revision to the previous negative outlook. S&P analysts expect economic recession of 2.7 percent for Russia in 2015, RBC reported on Monday. The agency`s previous report assumed a GDP growth of 0.5 percent in 2015 and zero growth in 2016. The main premise which has changed the S&P`s outlook for Russian economy was the assumption on the oil price movement, S&P analyst Irina Veliyeva told RBC, adding that the rating agency forecasts an average price of $55 a barrel for 2015 and $70 per barrel over the next three years. The forecasts for GDP growth and other key indicators have been revised as Russia`s economy is dependent on oil prices, Veliyeva said. Meanwhile, there has been a general tendency of improving economic forecasts for the Russian economy. Last week, US bank JPMorgan forecast Russia`s GDP for 2015 would improve from a 5 percent fall to 4 percent. Economists from Russia and the US agreed last month that the Russian economy had already recovered from the worst. Inflation in Russia remains high and hit 16.9 percent annualized in March and 7.4 percent since the beginning of the year, according to Rosstat data. The head of the Central Bank of Russia Elvira Nabiullina said she expected inflation to go down to nine percent by next March. We think the scenario of reaching a mid-term target to reach four percent inflation by 2017 is realistic, she said. The Russian ruble, which is a key indicator for the country`s economy, has been doing better than Brent crude. Oil has played a much less prominent role in the ruble`s exchange rate in the first three months of 2015. The US-based S&P`s forecasts are close to those from Russian authorities. The Russian Ministry of Economic Development expects a 2.3 percent GDP growth in 2016 and 2.5 percent growth in 2017/2018.The Central Bank`s forecasts are less optimistic a 3.54 percent decline for 2015 and positive 11.6 percent in 2016. Nevertheless, the CBR expects growth of 5.56.3 percent in 2017.

07.04.2015 16:09 WSJ Survey: Economists See Dollar Strength, Global Weakness Restraining U.S. Growth

The surging dollar and a global slowdown are likely to restrain the U.S. economy through at least the first half of the year, according to The Wall Street Journal`s March survey of economic forecasters. Harsh winter weather is already slowing output in the current quarter. But even once that drag melts away, a wider trade gap will remain a headwind, the economists said. That could keep overall economic growth just below 3% in 2015. The panel of 63 economists,—not all of whom answered every question,—forecasts inflation-adjusted gross domestic product to clock in at a modest annual rate of 2.3% this quarter, little changed from the 2.2% pace of the fourth quarter of 2014. They expect much of the lost activity will be made up in the spring, allowing the economy to grow at a 3% pace in the second quarter. For the entire year, the economists think GDP will grow 2.9%. That would beat the 2.4% increase in 2014 and be fast enough to push the unemployment rate down to 5.1% by December from 5.5% in February, they said.

03.04.2015 17:07 World Bank sees protracted recession in Russia

Russia faces a protracted recession as the impact of Western sanctions lingers and oil prices stay low, the World Bank said in a report. In its baseline scenario, the bank expected Russia`s gross domestic product to contract by 3.8 percent in 2015 and a further 0.3 percent in 2016, describing medium-term growth prospects as dim. The World Bank`s lead economist for Russia, Birgit Hansl, said "adjustment to the new oil price reality and the sanctions environment" was a key policy challenge. "If we look more into the medium term, the main challenge for Russia is the continued dearth in investment," she said, presenting the report. The bank`s latest forecasts are more pessimistic than those made in December, when it expected the economy to shrink by 0.7 percent this year and grow by 0.3 percent in 2016. The new baseline forecasts assume that the oil price will recover only marginally over the next two years, averaging $53 per barrel in 2015 and $57 per barrel in 2016, reflecting ample global supplies and moderate demand. Under a more optimistic scenario, with oil averaging $65.5 per barrel in 2015 and $68.7 per barrel in 2016, the economy would contract by 2.9 percent this year and grow by only 0.1 percent in 2016, the World Bank said. Its latest forecasts assume that sanctions imposed against Russia because of its role in the Ukraine conflict would stay in place in 2015 and 2016.

02.04.2015 17:34 Russian Economy Unexpectedly Expanded 0.4% in Fourth Quarter

Russia`s economy unexpectedly grew in the fourth quarter before the full effect of the country`s currency crisis took hold. Gross domestic product expanded 0.4 percent from a year earlier after a revised 0.9 percent gain in the previous three months, the Federal Statistics Service in Moscow said on Wednesday, citing a preliminary estimate. That was above the median estimate for zero growth by 11 economists in a Bloomberg survey. Full-year GDP rose 0.6 percent in 2014, the service said, confirming its first assessment in January. The economy of the world`s largest energy exporter was grinding to a halt before an almost 50 percent crash in oil prices and the ruble`s worst crisis since 1998 brought Russia to the brink of a recession. Sanctions imposed by the U.S. and the European Union over the conflict in Ukraine cut off access to international markets and stoked capital outflows, forcing authorities to respond with spending cutbacks and an emergency increase in the benchmark interest rate in December. The economy is gradually entering a recession, said Vladimir Tikhomirov, chief economist at BCS Financial Group in Moscow. It`s difficult to say when a reversal will happen. I expect that it may happen in the course of the coming three to six months. A one-time burst of consumer demand in late 2014 may have supported growth, according to Tikhomirov.

31.03.2015 11:36 Economic Growth Cools As US GDP Expands 2.2%, Below Forecasts in Fourth Quarter Of 2014

U.S. gross domestic product, the broadest measure of goods and services produced across the economy, grew at a seasonally adjusted annual rate of 2.2 percent in the last three months of 2014, the Commerce Department said in its third and final estimate. The final revision missed economists` expectations for 2.4 percent annual growth, according to analysts polled by Thomson Reuters. The downward revision comes after economic growth smashed expectations in the third quarter after GDP grew 5 percent. Meanwhile, U.S. GDP increased 4.6 percent in the second quarter, after decreasing 2.1 percent in the first. The slowdown in growth comes as the U.S. Federal Reserve downgraded its GDP forecasts for this year. Annual U.S. gross domestic product in 2015 is expected to grow 2.3 percent to 2.7 percent, down sharply from the central bank`s estimate of 2.6 percent to 3 percent in December, the FOMC said in its economic projections following the central bank`s meeting last week. Economists expect first quarter growth to slow this year, driven by harsh winter weather and a downturn in U.S. business investment. Consumer spending, which accounts for nearly two-thirds of U.S. economic activity, fell in January despite a precipitous drop in gasoline prices across America. Spending declined 0.2 percent in January after falling 0.3 percent in December, the Commerce Department said earlier this month.

30.03.2015 15:49 China GDP growth to slow to 7.2% in 2015

The Asian Development Bank expected China`s economic growth may moderate to 7.2 percent this year and 7 percent in 2016 as the government targets slower rate and continues its program of structural reforms, the Manila-based bank said in a report. "China is likely to retain its position as the biggest contributor to the world`s economic growth in both 2015 and 2016," the bank said in its latest flagship annual economic publication Asian Development Outlook 2015. The projection was higher than the official growth target of around 7 percent set by the central government earlier this month at the annual session of the National People`s Congress. The bank said China`s economy could continue to deliver solid growth as long as the government makes steady progress on its reform agenda to elevate productivity. "There are natural forces for growth moderation such as a shrinking working-age population and rising labor costs," said ADB Chief Economist Shang-Jin Wei. "Deepening financial sector reform, such as reducing the dominance of state-owned banks and liberalizing interest rates while preserving financial stability, is key element of the needed reform package." China`s gross domestic product expanded 7.4 percent from a year earlier in 2014, with production growth slowdown in all sectors except agriculture.

28.03.2015 12:24 Russian Inflation: Worse Than Almost Everywhere In Eastern Europe

Rosstat released a surprisingly large batch of statistics the other day. There was a lot of useful information, but the most interesting and pertinent was a comparison of Russian inflation since December of last year with inflation in a wide range of other economies. It`s not exactly shocking, or at least it shouldn`t be, but no matter what criteria you use Russia`s performance was terrible. Over the course of the past several months, the only country in Europe, and one of a small handful of countries anywhere in the world, in which consumer prices grew more quickly was Ukraine. Even countries that have traditionally been monetary basket cases, like Kyrgyzstan, have current levels of inflation that are substantially below Russia`s. All across Europe, there are massive disinflationary pressures. Largely influenced by a collapse in the price of oil, consumer prices fell not only in the fully developed Western markets, but even in post-communist transition countries like Poland.

27.03.2015 12:14 Russia`s economy in 2015 - more resilience than expected

How is Russia`s economy doing right now? Pretty clearly, the answer is not very well. 2014 was the first year since Putin came to power in which, due to a combination of spiking inflation, plummeting oil prices and flat-lining growth, the average real disposable income actually shrank. The economy still managed to eke out 0.6% overall growth, but no one, not even the Kremlin, could dispute the blackening outlook and the general sense of malaise. There is a universal consensus that 2015 will be worse. But exactly how much worse? Here the answer is not at all clear. Anders Aslund was a particularly high profile member of what can be called the "disaster caucus", the people who think that Russia`s economy is headed for implosion. He predicted that 2015 would see a recession that would lop off somewhere between 8% and 10% of total output, substantially worse than the crisis year of 2009. Needless to say, Aslund`s forecasts seems unduly pessimistic. Yes the current mood is grim, but it`s nothing like the blind panic which was gripping the world financial system in the aftermath of the collapse of Lehman Brothers. In contrast, Russia`s current crisis has been a slow-motion one. Things haven`t happened all at once, it`s been a slow drop of bad news over the course of a year. Market participants are all too aware of what is likely to happen. That will likely make resolution of the crisis more difficult (it seems a virtual certainty that the current recession will be more protracted than 2009`s) but it also means that panicked uncertainty, which was a hallmark of 2009, is absent. Outside of the Russian finance ministry, which predicts a modest recession in 2015 and a return to 2-2.5% growth as soon as 2016, other estimates broadly expect a contraction of somewhere between 4% and 6%. The latter figure is the position of market economists and credit ratings firms, while the slightly more optimistic figure is the product of the Central Bank of Russia (which estimates that the economy will shrink by 0.7% over the first quarter of this year).

26.03.2015 14:34 Russian economy revives despite sanctions

The Russian economy has seen a notable rebound with businesses recovering despite a year of contraction caused by Western sanctions. Fluctuations in the domestic currency have narrowed, which brought investors back into the market. Global investors appear to be optimistic about the future of Russian corporations, as the country`s economic performance provides evidence to recovery, says Bloomberg analyst Matthew Winkler in his article. Those who invested in ruble-denominated government securities this year have already made a profit equivalent to seven percent in dollar terms, while those who invested in government bonds of other developing countries lost more than one percent from January, he says. The holders of corporate bonds gained even more with a 7.3 percent return in 2015, which leads the index for emerging market corporate bonds compiled by Bloomberg. The 50 Russian stocks in the MICEX are up 11.9 percent this year, which is better than any North American market, and that, according to analysts, shows confidence is starting to return. Russian companies were more profitable measured by their Ebitda margins (earnings before taxes, depreciation and amortization) than the rest of the global MSCI Emerging Market Index. Around 78 percent of enterprises represented in the MICEX index showed a greater increase in sales than their counterparts around the world. For instance, Novatek OAO, a $22.8 billion independent producer of natural gas in western Siberia, saw its sales increase 19.5 percent, compared with 0.76 percent from the sector globally. Oil major Rosneft with a capitalization of $41 billion and production in western Siberia, Sakhalin, the North Caucasus and the Arctic, reported an 18.26 percent annual sales growth, while its international competitors having shown an increase in revenue of just 0.76 percent. However, the pace of economic recovery strongly depends on investment demand, according to Russian Finance Minister Anton Siluanov. The finance ministry estimates the country`s GDP will fall by roughly three percent in 2015.


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